Starting your own business is like embarking on a thrilling journey. It can be exciting, but it requires you to be careful and knowledgeable about managing your funds. One of the first and most critical steps, according to successful entrepreneur Mark Cuban, is to create a dedicated business bank account. He emphasizes, “When you’re starting, don’t you want to know where every single penny goes? This is critical information.”
Understanding the Basics
It’s essential to recognize that, as Cuban points out, “A business bank account is a little different than a personal bank account.” This special account will help you keep track of your business’s money separately from your personal funds. Think of it like having two different wallets — one for your business and one for yourself.
The Importance of Tracking Every Penny
Mark Cuban stresses the significance of knowing where every cent of your business’s money is spent or earned.
“When I first got started, I was looking at my weekly sales, my general ledger, all the accounting information to make sure I didn’t miss anything because I need to make sure I know where every single penny goes,” Cuban says.
Keeping a close eye on your funds allows you to understand your business better and helps in making informed decisions.
Most business owners start out funding their businesses with personal money. This is called an owner’s contribution. These contributions can be large one-time-only deposits or small deposits when the business needs money. The important thing to remember is that even if the money is from your personal account, it needs to be carefully tracked in order to be eligible for tax benefits. A best practice is to separate funds with a business bank account for more accurate reporting.
Protection from Personal Liability
Having a separate business bank account is especially important if you’ve formed an LLC or a corporation, as it helps to protect your personal assets from business debts and liabilities.
Ordinarily, an LLC or a corporation is considered a separate legal entity from its owner(s), meaning that someone suing the business usually can’t go after the owners’ personal assets (for example, their savings, home, car, etc.) But commingling funds not only makes your taxes more difficult to sort out — it could also be used against you if someone takes you to court to challenge whether you and your LLC or corporation are truly separate entities (that is, they want to sue you for not just your business assets, but also your own assets).
Getting a Business Credit Card
Cuban suggests, “You may want to get a [business] credit card or a debit card associated with that.” Having a business credit card will allow you to make purchases specifically for your business and build credit for your business, which can be beneficial in the future when you might need to borrow money or get more credit.
Keeping Good Accounting Practices
Knowing how much money is coming in and going out is crucial for running a successful business. Cuban advises, “Not only do you want a bank account to track your money, you want to have an accounting system that keeps track of whether you’re making money or losing money.”
A good accounting system will help you understand your profits and losses, cash flow, and overall financial health of your business. Without this knowledge, it’s impossible to know whether your business is successful or not.
Importance of Regular Check-ins
Cuban explains the importance of regular financial check-ins.
“Unless you’re doing all the entries into your general ledger yourself, you don’t really know, and because you don’t really know on a day-to-day basis, you want to get that P&L statement, that statement of cash flow,” Cuban advises.
Regularly checking your profit and loss statement and your cash flow statement will give you a clear picture of your business’s financial status, helping you make better business decisions.
Good bookkeeping is a must
Beyond having a separate business bank account and keeping an eye on your accounting information, maintaining good bookkeeping practices is paramount. This includes regularly updating your financial records, organizing receipts and invoices, and ensuring all transactions are correctly recorded.
“You have to know that the money coming in from the sales and maybe the accounts receivable goes into your general ledger and what’s a debit and what’s a credit,” says Cuban, emphasizing the need to understand basic accounting concepts.
Final Thoughts
Mark Cuban’s advice underscores the significance of financial prudence and discipline in managing a business. For first-time entrepreneurs, understanding and implementing basic financial and accounting practices, such as establishing a separate business bank account and maintaining clear, accurate financial records, can be the cornerstone for building a successful venture.
Remember, knowing where “every single penny goes” is not just about being meticulous — it’s about having control and clarity over your business operations, which in turn will empower you to steer your enterprise toward success and sustainability. So, step forth with knowledge and confidence, and let your business flourish.
How We Can Help
Here at ZenBusiness, we offer a discounted bank account for your new company. This allows for unlimited transactions, online banking, a debit card, and more. When you want to authorize others in your business to use the account, we offer a banking resolution template to simplify the process.
For further help managing your new business’s finances, try ZenBusiness Money. It can help you create invoices, receive payments, keep track of deductible expenses, transfer money, and manage clients all in one place.
Disclaimer: The content on this page is for informational purposes only, and does not constitute legal, tax, or accounting advice. If you have specific questions about any of these topics, seek the counsel of a licensed professional.
ZenBusiness is a financial technology company and is not a bank. Banking services provided by Thread Bank; Member FDIC. The ZenBusiness Visa® Debit Card is issued by Thread Bank pursuant to a license from Visa U.S.A. Inc. and may be used everywhere Visa debit cards are accepted. Your funds are FDIC insured up to $250,000 through Thread Bank; Member FDIC.
