When you have just started your own business, it may feel natural to simply write a cheque from your personal chequing account. However, this can be a major mistake that can make it very difficult to separate your personal finances from your business finances. In order to get in the habit of keeping your business and personal life separate, and to reap several other benefits, you will need business cheques.
1. Less Tax Hassles
Business cheques make it much easier to avoid tax headaches. Since all of your business-related payments will have been made under your business name, it will be much easier to claim these as business expense deductions for tax purposes. It will be much easier to substantiate the deductions you make in the event of an audit. Business cheques become a requirement when you have become incorporated.
2. Manage Your Personal Finances Better
All of your business income is sent to your business checking account. Then, you can designate a set amount that is transferred from your business checking account to your personal checking account. By keeping this set amount consistent, you will know how much you must budget for and will be less tempted to spend too much of your profits on better months. You will have a cushion to support you during less profitable months.
3. Take Advantage Of Limited Liability Laws
When you keep your finances separate, and your business is forced to file for bankruptcy, your creditors will be able to go after the finances in your business chequing account. However, the creditors will not be able to target your personal finances. One exception is if you are constantly mixing your personal and business expenses. If you are often using business expenses for personal matters and personal finances for business expenses, the courts will not necessarily see you and your business as a separate entity and you may be sued.
4. Delegate Tasks To Employees
Business cheques can have multiple signers. If you need to delegate purchasing and other financial responsibilities to an employee, having business cheques will make it much easier to do so. Employees can simply write checks for business matters. External accounting services can be given authorization to examine your business’s account statements.
5. More Professional
Ultimately, having business cheques makes your business appear more professional and established. This will increase the odds that customers are willing to do business with you. When a cheque has your own name on it, rather than the name of your business, some customers will wonder how serious your business is.