The Best Time to Open a Blog Bank Account

So, you're starting a blog, and hoping to make money from it. You've paid for a domain, a theme perhaps, and maybe even a couple programs like social media schedulers or email marketing providers. You're on the startup hustle, that's for sure!

Your business isn't making any money yet, or maybe it's just making a little. You know that, at some point, it'll be a smart move to separate your personal and business money, but you're not quite a business yet, are you?

So what's the right time to start a separate account for your blog? When is it enough of a business to treat it like one?

Now. Yesterday. No later than tomorrow. Should have already been done. Get to it, STAT.

And if you have been making decent money from your blog?

You're way behind, sorry.

Separate your personal and business finances immediately.

Pinterest image for the best time to open a blog bank account

Why do they have to be separate?

Tracking (and tax!) purposes: You have to report your business income and expenses on your personal tax return.

I got really sick of dealing with clients who had no idea what expenses they had throughout the year because they didn't keep track. They then had to go through all their personal bank statements and literally highlight anything they thought was probably a business-related expense.

On behalf of your tax preparer: Please. don't. do. that.

Common sense purposes: Your business is its own entity! Maybe not legally or tax-wise, but conceptually. Don't you want your business to earn money, and use that money to pay for itself? That's profit, right there! How will you ever know when your business is profitable when your business transactions are mixed in with your groceries and Amazon binges?


What's the advantage?


- Tracking

As I said above, it's 1000x easier to track your business finances when it's all in one place. Having to track down money every single month is the precise reason why so many people fail to implement any sort of bookkeeping system!

When all your deposits and withdrawals can be seen in ONE account, you don't have to go on a wild goose-chase every time you want to get organized.

If you're lazy or busy or both, simplifying your processes is a MUST.


- Reconciliation

This is beautiful. You know that wild goose-chase you're going on when your transactions are all over the place? Well, how do you know that you got it all? Truthfully, you can't, unless you spend a lot of time combing through every transaction you've ever had.

Instead, when you know that all of your business transactions are in one account, you can do a quick and easy bank reconciliation to make sure your bookkeeping has captured everything!

What does this mean? You tell your bookkeeping software (I use Wave, it's free!) what your starting bank balance is on the 1st of the month. You add in all your transactions, both deposits and withdrawals (or let your software automatically import them from your bank for you!), for the entire month.

Then you tell your bookkeeping software what your bank statement says your ending balance is. Your software will then make sure that all the deposits and withdrawals you told it about net out to be the same balance.

diagram with bank reconciliation formula

diagram with bank reconciliation formula

You win if your bank statement and your bookkeeping software reflect the same ending balance!


Related Post: How to Know You Did Your Books Right: An Introduction to Reconciliations


- Budgeting

Everyone's least favorite 'b' word (though it should be your favorite!)

When your business' funds are mixed in with your personal funds, how do you know how much to spend to keep your business profitable?

In other words, if your business made $100 this month but that money is mixed into your personal account balance of $500 (we're simplifying here), you may spend $300 on a fancy Course which has now put your business into the red! The goal is to get your business to be self-sustaining, and that means we need profits. And the only way to control your spending and manage your income to reach those profits is to be able to organize everything carefully and BUDGET.

Which is, you guessed it, way simpler with a separate account to see your funds.


Well, isn't it my money?

Yes, but you want to take from your business' earned funds in an organized manner.

Distributing your business profits to yourself as owner is completely fine, as long as your business can afford to do so! But if you're robbing your business of all its resources, it'll never be able to independently fund itself!

Common question: Do you have to pay yourself like an employee? Short answer, no, not now when you're just a sole proprietor doing your side-hustle thing. Stay tuned for another blog post with the long answer and special cases!

You also want to be able to reinvest into your business to help it grow, and you can't do that if you're funds are all mixed together and you can't strategize your investments.


But my business can't fund itself yet!

That's okay! If you just open a separate account with your regular personal online banking, it'll be a breeze to transfer your personal funds into your business' account. This is the way it should be done, anyway.

This way, you can track how much money you've put into your business (and how much you've taken out!), which is a valuable component of knowing your business' equity, which is essentially its value! (Ever seen Shark Tank?)


But business bank accounts have fees and requirements!

True, though that definitely varies by bank.

But if you're a sole proprietor, you really don't need a business bank account. Look into your bank's rules, but really, it's your money legally, so I'm fairly certain no one will have an issue with this.

You don't need the bells and whistles. You just need a separate space for your business-related income and expenses.


Do yourself a favor...

I'll be completely transparent here. I knew this prior to starting my blog, but I procrastinated on opening a separate account because I had to change my name with the bank still after getting married and I was too lazy to fill out the form. So trust me, I get it.

But don't do what I did. Do better.

If doing your own bookkeeping has been stressing you out and you don't have your business funds in a separate account, I promise you'll make your life a million times easier if you take care of this now.


Side note: Remember to keep those funds separate. No swiping your business account debit card in the grocery line! The best way to handle this is to transfer the funds between accounts before spending the money. You can still track the distribution if you spend personally straight out of the business account, but it's much safer to transfer the funds first.

Until next time!

- Katie Scott