Freelancing is sheer magic – you are your boss and have the freedom to choose your projects, set your hours, and work from any corner of the globe. It also makes you a sole proprietor of your business that comes with many decisions to make. After you have decided to freelance, you will need to decide how to manage your business finances. The best way to do so is to open a bank account explicitly for your freelancing expenses and income so that you can keep your personal and business finances organized and separate.
Separating Personal and Professional Finances
In the USA alone, there are about 56.7 million freelancers accounting for about a third of the total workforce. Of this, about 51% opined in a research study that no amount of money would make them give up freelancing and opt for a traditional job. If you have the same mindset, it’s probably because you need the flexibility to work on your terms.
Since you are now running a business, do not make the mistake of maintaining your personal and professional finances in the same account. It is highly recommended to open a business bank account that is distinct and separate from your personal account. There are several benefits to setting things up this way, the most important being that it will simplify the tracking of your freelancing expenses and income. Having a business checking account also serves the legitimacy and professionalism of your freelance work and there are potentially less restrictions on the financial choices that you make.
Here is how you can make the most of your freelancing activities with a small business owners bank account.
- Distinguishing your business from personal finances: You have to be highly organized to successfully run a freelancing business. Without the right systems in place, it is quite a challenge to keep your finances in order. A separate business account means that your personal account transactions are insulated from the variables of a business account and helps to keep a seamless check on your freelancing revenue, expenses, and profit. It also keeps a track of your earnings and expenses on the same dashboard and lets you estimate the cash flow for any month.
- Easy filing of taxes: Filing taxes can be complex when you are a freelancer. You have to verify all your paychecks to know your earnings and the numbers can be dozens from various sources like direct deposit, PayPal, and more. A standalone business account will help make the tax filing process easier because you will have bank statements from which you can calculate your income and expenses more quickly. Accurate and timely tax filings by a freelancer is critical to avoid IRS penalties and fees.
- More flexibility in business accounts: Business accounts have more flexibility than personal accounts. You will be sending and receiving a lot of money and hence need more options for conducting transactions once your small business starts growing. A business account allows you to write checks, accept credit card payments, and collect receipts, all of which are integral to your freelancing business. Further, a business account has fewer restrictions than a personal account where there are limitations on the number of transactions that can be made and the size of the transfers. These can cramp the financial freedom you need for your business.
- Proving your professionalism: The perception of what your clients have about you is as important as the work you do. They should see you as a professional who is serious about the freelancing business, a trait that a business account will help you to achieve. A check from a personal account is not seen with the same level of importance and legitimacy as that from a business account. As your business progresses and you build stable relationships with clients, they will know that you are in this business for the long haul and increase the opportunity for repeat business.
- Linking with other business banking software: The best bank accounts for freelancers are more than a mere checking account and serve as a financial fulcrum that provides a number of services. Most importantly, these accounts link up with other business banking software to give you wider coverage in the scope of your transactions.
Key Benefits of a Business Account
As a freelancer, your primary focus should be on your work, and making sure that you are generating income. Apart from the necessity of maintaining separation between your personal and business transactions, there are two key takeaways of a keeping business account apart:
- Opening up new financial options: Many freelancers seek a credit line from banks that serve as a safety net in case things get tough. Many banks will sanction a line of credit or offer loans only if you have a dedicated business account. On the other hand, you might even want to raise capital if you want to expand your business and take it to the next level. When you meet investors, they will want to know about your financial health and the state of your finances. A business account statement will not only provide all these details, and again also lets them know you are a serious professional. Even if it is a fresh idea that you are presenting, investors will want to know your precedents and be assured that their money in good hands.
- Building a business asset: As your business rolls along and work begins to pick up – you may need to step up your freelance activities to the next level. Continuously evaluate your business goals and benchmarks. Is it growing to a pre-determined level, generating target revenue, or selling your business someday? Regardless of the goals you have, you must build your business into an asset that grows over time. To make this happen, it is necessary to have in place a strong financial foundation that translates into building an efficient accounting framework and having a business bank account to support it. For example, if you want to sell your freelancing business someday, potential buyers will want to know how it has performed in the past. Having a paper trail through dedicated business account bank statements will support your credibility and attract more lucrative offers. Even if you want to continue running your freelance business, treat it as a marketable asset. This mindset will help you build a more profitable business.
Before opening a business account, study what different banks have on offer. Some business banking providers offer reduced or zero monthly fees for a limited period and revert to the old rates later where you have to pay a monthly fee apart from the transaction fees. Check the terms and conditions with different banks when in doubt. Whichever business bank accounts you might choose to put your money in, ensure that it has a quick and seamless signup.
Most bank accounts today can be opened in a manner of minutes from a smartphone.
Should you have your business and personal accounts in the same bank?
Let’s review the idea of keeping your personal and business accounts within the same institution. Here are some of the benefits:
- Easy transfer of money and funds management: It is easier and faster to transfer money between personal and business accounts when both are in the same bank. These transfers can be made in minutes, whereas transferring funds between different institutions might take days.
- Relationship discounts: With personal and business accounts under the same roof you become eligible for loyalty rewards like lower fees, better rates, and relationship discounts.
- Perceived to be creditworthy: With both accounts in the same bank and both managed well, it improves your chances to take out a loan or get a credit line sanctioned.
The Best Banks for Freelancers
Here are some of the best banks for freelancers. You will notice that all of them are online banks. It is highly recommended that your business bank account is accessible and manageable online. The good news is that most of them are these days. These online banks combined with the power of a laptop or a smartphone will enable efficient and timely accounting for your freelance business.
Revolut is a British-based company offering a range of financial services. You get a prepaid debit card that enables withdrawals from ATM s in 150 currencies and money transfers in 30 currencies. The app is available both on Android and IOS and has unique features like vaults for budgeting. Interestingly, Revolut provides a cryptocurrency exchange through which you can convert any currency to Bitcoin, Litecoin, Bitcoin Cash, Ethereum, and more.
- With a business account, you can receive and exchange money in 30 different currencies.
- You have the Revolut business account where you can order several prepaid Mastercard debit cards to withdraw money at ATMs and pay at merchants in the UK or anywhere else.
- You can manage all aspects of your account through the Revolut Business app for phones and tablets.
- Not possible to make bulk payments with the free plan
- Clients pay a 2% fee for ATM withdrawals after the monthly limit is passed.
- Customer support is not available 24×7.
Revolut is available in Europe, Australia, Canada, Singapore, Switzerland, and the United States.
Considered to be a leader in this field, PayPal has over 230 million users from all corners of the globe and is one of the most popular and used channels of payment for freelancers. You get instant access to your funds in your PayPal account through a Business Debit Mastercard. You do not have to pay any fees when you are shopping with a PayPal card, but a small conversion fee is charged for different currencies. PayPal has a highly optimized mobile app where all data can be stored and awesome reporting tools available through the reporting browser.
- Easy setup
- Freelancers can be paid by clients without having a PayPal account
- Receive payments from international clients
- Available in 200 countries with support to 25 currencies
- Multiple payment options including checks
- PayPal is a comprehensive payment system and allows freelancers to make customized invoices
- You can send email payment requests through PayPal
- Your PayPal account can be frozen without prior information
- For large sales volumes, PayPal charges high transaction fees.
- Poor customer support
- Clients may have to wait up to four days to withdraw funds
- Fees for chargebacks are astronomical
PayPal is available in Europe, Africa, and Asia.
BlueVine is one of the best checking accounts for freelancers. Most fees like monthly maintenance fees, transaction fees, and overdrafts are waived. Depositing cash in your BlueVine business checking account is easy and can be done from any greendot® location. The icing on the cake is the free checkbooks provided when you open an account.
What makes BlueVine stand out among competitors is that interest is offered in business checking accounts only. From the time a BlueVine account is opened, you start earning 1% interest, at least till balances up to $100,000. It is a rate that is even higher than most savings accounts today. A BlueVine business account adds to your income through interest received – no invoicing or extra hours.
- Easy cash deposit
- Interest-bearing checking account
- Competitive interest rate
- No interest payable on amounts over $100,000
Financial services Monese was established in the UK in 2015 and is a mobile app-based online banking and service that has all the activities of traditional banking services. Freelancers can open an account in the UK or the Eurozone without showing a UK address, credit history, or fixed income. All that you have to show is a national identity card and submit a passport photograph.
- Monese is available in 14 different languages
- Transfer and payment processing takes only 2 to 3 hours
- Monese integrates with Google Pay and Apple Pay and clients can pay from funds available on these platforms
- Monese is a portable banking service offering facilities in 20 countries in the Eurozone.
- Credit cards can be blocked and unblocked through the app and contactless debit cards up to purchases below £3030are issued.
- You get a free Monese MasterCard with your account.
- Clients can set up standing instructions for debit from their account for utility payments.
- The free plan has limited features
- Overdraft or loans are not sanctioned
- No FSCS protection
- Accounts can be accessed through a single smartphone only
ATM withdrawals are limited to 6 even with unlimited transactions on a Plus plan Monese is available in the Eurozone countries and the UK.
Online shopping, transactions, account verification.
NorthOne, ach payments, launched in 20119 is a digital banking service specially created for small businesses, freelancers, and start-ups. As a busy freelancer, you will appreciate the features of NorthOne that include invoice-sending, sub-accounts, and free cash deposits and withdrawals at over 300,000 ATMs.
The site can be accessed both from an app and a website. You can deposit cash and checks, view transactions, send money, and transfer invoices. Most importantly, NorthOne integrates with advanced digital business tools like PayPal, QuickBooks, Shopify, Square, and others.
- Checking deposits is possible from the app
- Separate accounts for funds like taxes, rent, and other uses.
- Unlimited number of transactions
- 24/7 customer support through email, live chat, and phone.
- Low and flat fees for the U.S and international wire transfers.
- Account history is available in real-time by setting smart filters.
- Deposit accounts of NorthOne are available only in the US.
- Minimum starting deposit of $50 or more
- Deposit accounts lack the multi-user business feature
NorthOne is available in the USA.
These are some of the best options for freelancer bank accounts. All have different features and functionalities, but freelancers and self-employed should choose the bank that meets their individual needs for financial management of their business.