You no doubt have one or more checking accounts for your business — it’s almost impossible to operate a business without one. But do you also have a business savings account?‍

Benefits of Business Savings Accounts‍

There are lots of advantages to opening and contributing to a business saving account. Here are 8 benefits of business savings accounts:

1. A financial cushion — This is especially important for seasonal businesses that experience wide fluctuations in sales and revenue throughout the year. Having cash available in a savings account can provide you with the liquid funds needed to meet working capital needs when sales and revenue slow down without having to tap a line of credit.‍

2. An emergency cash stash — A business savings account can come in handy if your business faces a financial emergency or unexpected major expense, like needing to repair or replace a large piece of equipment or a company vehicle. In this way, a business savings account can function in much the same capacity as a household emergency savings fund.

One common rule of thumb is to save at least three months’ worth of business expenses in a business savings account. So if your business expenses are $10,000 per month, you’d want to save $30,000 for starters. Once you’ve saved this much, you could strive to build your business savings account up to six and eventually 12 months’ worth of expenses.‍

3. Earning, instead of paying, interest — When you deposit funds in a business savings account, you’ll earn market rates of interest on your savings. The higher your savings balance, the higher your interest rate and earnings may be. In contrast, when you borrow money to cover working capital shortfalls or pay for unexpected expenses, you will pay interest on the funds you borrow.‍

4. Easy access to growth and expansion capital — Business growth opportunities can arise at any time — and sometimes when you least expect them. By having cash in a liquid business savings account, you might be able to move quickly in order to capitalize on these opportunities.

For example, suppose you had a chance to buy a piece of equipment at a major discount that could significantly boost production and sales? An opening to acquire a struggling competitor at a fire sale price that you believe you can quickly turn around and make profitable? Or an opportunity to purchase land or real estate that would enable you to expand your business? Having cash available in a business savings account could help you take advantage of each of these growth opportunities.‍

5. Funds to pay taxes — Even if your business makes estimated quarterly tax payments, you could still end up owing Uncle Sam when you file your federal income tax return. Business savings can provide the liquid funds needed to cover any tax liabilities you may face, thus enabling you to avoid penalties and interest that might accrue on unpaid business taxes.‍

6. Strong business credit — Maintaining a healthy balance in a business savings account can help boost your business credit rating. Savings balances are one of the factors considered by the credit rating agencies that assign business credit scores. Having strong business credit could help you obtain financing at some point in the future if you ever need it.‍

7. Automatic savings transfers — Funds can be automatically transferred from a business checking account into a business savings account, which makes saving more convenient.‍

8. Protection from overdrafts - Tie your business savings account to your business checking account to protect your checking account from overdrafts that may occur due to an inadvertent bookkeeping error.

If you don’t currently have a business savings account, consider how opening and contributing to one could benefit your business.