Starting up is hard. As a founder, there are a million things that need your tending. Out of those, one of the very first things is opening a business bank account.
If you are not careful about business banking right from the start, it can have a huge impact on your bottom line. In fact, the most common mistakes that startups make are related to finance management.
We curated an eye-opening blog post that lists the top 7 business banking mistakes startups make. Read on to see and ensure you’re on the right track.
7 Common business banking mistakes made by startups
1. Not having a designated business account
Startup founders must keep their business and personal bank accounts separate. You don’t want to scout through scores of personal expenses to find a particular business transaction, or feel overwhelmed with the bank balance or the outgo when both personal and business transactions are mixed up.
A separate business bank account will also make accounting easier, help track the financial growth of the business, assist with planning advance tax payments and even help in budgeting. It will also make business loan applications simpler when you are required to submit bank statements, as you will already have a separate business account.
2. Choosing the right bank
While opening a business account with the same bank where you have a personal account may be a convenient choice, it is important to understand that the needs for both are pretty different.
You need to choose a banking partner who understands your needs as a startup. Currently, Neo banks offer various startup-friendly fee structures, incentive/reward programs, withdrawal and deposit caps based on cash flow, easy integration with accounting software and more. RazorpayX offers a full suite of products such as vendor payments, payouts, payroll, and more.
3. Availing bank loans when you don’t need it
Several business banking partners would offer you a business loan at an attractive, never-heard-before-interest rate. But the question is, “Do you really need it?”. The backbone of any new business can be affected by higher interest rates. As you repay the bank, the chances of not bearing enough to reinvest into your business could weigh more.
Availing of loans initially would allow the bank to pursue you for repayment during the initial days of your business which might pose a higher risk too. This, in turn, can affect your personal assets and credit score.
4. Using personal credit cards for business expenses
As an entrepreneur, making business payments with a personal credit card is a big no-no. If credit utilization exceeds 30%, this will not only attack your personal credit score but also make reimbursement messy. And as we know, delayed payments can lead to a heavy penalty. While building a business credit history is important, using your personal credit card for your expenses can have an effect on it. You can keep better track of your expenses by avoiding personal expenses on a business card.
RazorpayX enables you to enjoy the benefits of a Corporate Credit card with a higher credit limit and so much more.
5. Not reconciling your bank accounts
Reconciliation of bank accounts means comparing it with your transaction/bookkeeping records to ensure that all the financial statements are a true record of how your business is performing.
This would also ensure that there are no missing transactions and would help identify uncleared transactions too. Verification of your bank statements every month will help detect or avoid the effect of any kind of fraudulent transactions on your business account. Not reviewing your expenses can make it difficult to make informed decisions about where to allocate your resources.
RazorpayX offers integration of its current account with accounting tools like Zoho, Quickbooks, and more to help you save time and get rid of manual errors.
5. Not automating financial operations as you scale up
You didn’t start up to deal with buggy systems, spending hours every month processing payroll or hopping a dozen portals while paying taxes. Automating financial operations in your startups like vendor payments, payroll, tax payments will enable you to look towards future-forward banking.
With automated banking, you can
- schedule salaries and miscellaneous payments
- automate invoice payments
- make bulk manual payments without manual efforts
- enjoy the simplified maker-checker, and so much more
7. Handling employee payroll manually
Payment and filing of compliances have been one of the most common issues faced by startup founders.
What if you could automate it all?
RazorpayX Payroll can solve all your payroll needs. It automates payroll and filing of compliances like TDS, PF, ESI and PT, in just 3 simple steps. It enables you to manage employee onboarding and so much more like:
- Dashboards for employees to access payslips
- Leave management via websites/APIs
- Affordable group health insurance
- Automated bifurcation of CTC
Why should you avoid these common mistakes?
The biggest setback that even one business banking mistake results in is loss of time. And in business–time is money.
When you spend time doing things that a future-forward banking platform can do for you, you are letting go of an opportunity to invest your time in your startup and put your skills to use to grow your business.
Let RazorpayX supercharge your business banking needs
RazorpayX was born out of the need to deliver the best experience for startup founders. It reimagines how businesses manage money flows and simplifies banking for Founders, CXOs Chartered Accountants and finance professionals.
RazorpayX is a full-stack banking suite that supercharges current accounts
- which provides end-to-end automation with powerful features
- like Automated Accounting, OTP management, Maker-Checker Flows,
- Corporate Cards with 20X higher limits
- Automated Vendor Payments
- Forex Services
- Payroll – India’s ONLY payroll with Full compliance automation, Employee Insurance management and TDS filing)
and a whole lot more, with 250 free payouts every month!