When you run an ecommerce business, it can be difficult to get a holistic understanding of your online store’s finances. And, if you use your personal finances for business, and vice versa, it can obscure things even further.
Sure, you could open business checking and savings accounts, but having to manage multiple bank accounts on top of your ecommerce platform can add more overhead to your business.
Fortunately, Shopify Balance, an alternative to traditional bank accounts, lets you skip the bank and cut costs. Balance is a free business financial account built right into your Shopify admin, making it easier and more efficient to manage your business’s money. Check out the requirements for using Balance.
When used together with the following business money management tips, Shopify Balance can save you from headaches and busywork, and give you time back to focus on growing your business.
5 tips for business money management
- Keep business and personal finances separate
- Track revenue and expenses
- Maximize cash flow
- Stay organized
- Prepare for tax season
1. Keep business and personal finances separate
When you start an ecommerce business, you may be too caught up in the excitement of making your first sale to think about where you’ll put the money from that sale. You might be using your personal credit or debit card to buy inventory and your personal checking account to store your profits.
While mixing business and personal finances is a stopgap measure for many new entrepreneurs, it shouldn’t be a long-term solution. You need to separate your business and personal finances sooner rather than later to protect yourself from liabilities, simplify business accounting, and streamline tax filing.
Here’s how to establish your business as an entity that is financially and legally separate from your personal identity:
Get an EIN
Think of an employer identification number (EIN) as a Social Security number for your business. You can get this unique nine-digit code online from the IRS instantly and use it to register your business, open a cash management account, file taxes, and more.
Register your business
Decide if you’ll operate your business as a sole proprietorship or establish an LLC or corporation to make it a distinct entity from yourself and protect yourself from lawsuits, debts, and other liabilities.
Get a Shopify Balance account and card
Open a Balance account to manage your money in the same place you run your business. You can further separate personal and business finances with a spending card that comes with your Balance account and lets you pay for business expenses and earn cashback rewards.1
Pay yourself a salary
Rather than taking out whatever is left over at the end of the month from your business as your “paycheck,” work with a financial professional to establish a salary for yourself. Paying yourself a consistent salary makes your business’s finances more predictable.
Do your taxes
Depending on your business structure, you may owe taxes quarterly and annually. Work with a tax professional to file your taxes correctly and on time. Shopify Balance integrates with accounting software, like QuickBooks Online, to simplify tax accounting.
By separating your business and personal finances, you’ll protect yourself and simplify your business’s money management.
2. Track revenue and expenses
In order to stay on top of your business’s financial health, you need to track every dollar that’s coming in and out. Unfortunately, tracking transactions can be a full-time job if your business’s money lives in multiple accounts.
But, when it’s all in Shopify Balance, keeping an eye on every dollar is much easier. You can see your Balance account activity while running your Shopify store. With low balance alerts, you’ll know immediately if your account balance drops below a certain amount. If your business keeps you on the go, you can check your transactions, transfer money, and more with the Shopify Balance mobile app.
Beyond keeping an eye on transactions, you also need to understand the big picture when it comes to your business’s finances. Leverage cash flow insights in Balance and comprehensive dashboards in the Finances section of your Shopify admin to make informed money decisions.
For example, you might learn that your business has been spending more than it’s been earning over the past few months and decide to hold off on purchasing new inventory until you’re profitable.
3. Maximize cash flow
Every dollar counts when you run a small business. By opting for an alternative to traditional banks you can keep more of your profits by avoiding bank fees, getting paid faster, and earning more on your hard-earned savings.
Skip bank fees
Traditional bank accounts charge on average $10 in monthly service fees, up to $35 per item on overdraft fees,2 and about $26 for wire transfers. Throughout the course of a year, those bank fees, as well as any hidden costs, could quickly add up to thousands of dollars in unnecessary expenses. That’s money better spent invested in your business.
When you use an alternative business financial account, like Shopify Balance, you won’t be subjected to monthly, transfer, or hidden fees. You also won’t be charged with withdrawal fees and can access your money whenever you need it.3
Get paid faster
With traditional bank accounts, accessing money from your Shopify sales can take seven days or longer.4 But if you can’t access cash when you need it, you might miss out on business opportunities.
If you have a Shopify Balance account, you’ll receive funds from your sales as soon as the next business day. After all, you earned that money and should be able to enjoy the fruits of your labor.
Earn a higher yield
In 2022, the US rate of inflation was 8%, while annual percentage yields (APYs) at big banks stood at about 0.01%. When you keep your business’s earnings in a traditional bank that gives you a near-zero APY, you’re actually losing money to inflation by keeping it there.
Make your money work harder for your business by keeping it in an account that rewards you with a high yield. With Shopify Balance, you earn a competitive rate in the form of an APY on all the money held in your Balance account.5 Check out the latest rate.
5 This is a reward provided by Shopify to eligible merchants and is not interest. The reward accrues daily, and is compounded and paid monthly in the form of a credit to your Balance account.
4. Stay organized
Staying organized is important in all aspects of business, but it’s especially critical when it comes to finances. When your financial ducks are in a row, you can make sure you have enough money to grow your business and stay accountable to external parties. Follow these tips to tidy up your business’s finances.
Organize your funds based on business needs
When you create a budget for your business, you already separate your spending into different categories. So, why not allocate your money to different accounts based on your spending needs?
With Shopify Balance, you can organize your money by opening up to five extra accounts on top of your main Balance account. For example, instead of having just one general account, you could have one for bills, another for inventory, and another for taxes.
This strategy is especially helpful when it comes to saving for taxes. Many small business owners get hit with a tax bill they don’t expect, and thus didn’t save for, so having a tax savings fund helps prevent that.
Keep records of transactions
Another thing you should be keeping organized is records of your business’s transactions. The IRS requires businesses to keep records of income, expenses, taxes, and more for at least three years.
Save yourself from panicking and spending days tracking down old receipts if the IRS audits you by maintaining records of transactions as you go. Export monthly statements from Balance for flawless bookkeeping and easy access to your records whenever you need them.
Schedule bill payments
Missing a bill payment can be inevitable when you’re a busy business owner, but it shouldn’t become a habit. The most foolproof way to make on-time payments to your vendors is to schedule bill payments.
If you want to pay bills with your funds in Shopify Balance, you can easily schedule and manage payments with Shopify Bill Pay, which is seamlessly connected to your Balance account. Bill Pay lets you use your preferred payment method—Balance, credit, debit, or bank transfer—while vendors get paid how they want.
5. Prepare for tax season
Gathering data for annual and quarterly tax returns is time consuming, even if you work with a tax professional. Incorporating tax prep into your regular routine can save you time and money when tax season comes around.
One way to do that is to sync transactions between your ecommerce platform and accounting software. Shopify Balance integrates with QuickBooks Online, Xero, FreshBooks, and other tools to automate your accounting.
You can also save time during tax season by setting aside sales taxes as you go instead of waiting until the last possible day. Balance gives you the option to automatically save collected sales tax in a dedicated account so you can avoid doing complicated calculations or scrambling to find the money that you’ve spent elsewhere. Shopify Tax further simplifies sales tax reporting by providing fast and easy access to the data you need to file.
Business money management made easy
Running a business and staying on top of its finances is challenging, but Shopify Balance is here to help. With a Balance account that lets you manage your money where you make it, you can spend less time worrying about your finances and more time growing your business.
Shopify partners with Stripe, Inc. and affiliated companies, and financial institution partners including Evolve Bank & Trust, Member FDIC, and Celtic Bank to offer money transmission, banking, and issuing services, respectively.
1 Earn up to $2,000 USD cashback on all eligible purchases per calendar year. This cashback limit may not apply to Shopify Partner offers. Learn more
2 Traditional bank accounts are comprised of publicly available data from select business bank accounts of the top three largest US banks by assets.
3 Shopify Balance has no monthly, transfer, or hidden fees. Shopify doesn’t charge any ATM withdrawal fees, but you may be charged by an ATM provider.
4 Payouts from Shopify Payments to your Shopify Balance account can take between one to three business days. This may be up to seven days earlier than a bank. Payouts from Shopify Payments to an external bank account can take up to five days. Banks may also take up to three additional days to process transfers. Time frames vary by financial institution.
5 This is a reward provided by Shopify to eligible merchants and is not interest. The reward accrues daily, and is compounded and paid monthly in the form of a credit to your Balance account.
