When you first start your Amazon Marketplace seller business there are many things to consider. One of the first topics on everyone’s mind is naturally money. How much will I spend, how do I make more, who will I need to pay, and how should I be tracking it may be just a few of the questions that pop into your head at the very beginning. Without information the basic topic itself can be daunting enough to turn some people away from starting their business altogether. Business banking doesn’t have to be scary, however, and with some basic information about your business and a small amount of administrative work your business can safely answer many of those questions in less than a day.
One of the first things you will need to do is set up a business bank account that allows you to separate your personal and business income and expenses. If your small business journey into Amazon Marketplace is just beginning it may be okay to start by using your personal bank account, but before long you will want to keep those lives separate. Having a business bank account can simultaneously make your life easier while keeping your own finances safe from any business liability, and can even offer you growth opportunities in the future.
Revenue, expenses, vendor payments, Amazon fees, and taxes are just a few of the things you will need to track for healthy bookkeeping with your small business. Having to separate out things like groceries, day care, car payments, and Netflix subscriptions at the same time is going to create some unneeded headaches to a critical part of your business. Having a separate business bank account is the absolute best way to ensure that the things showing up in your account are exactly what you will need to review and report come tax season.
As you grow, this only becomes more critical. Managing larger product stock and shipping purchases, advertising fees, and even payroll is not something you want to have intermingled with your own personal finances. Not only does it improve the chance of human error creeping into your day-to-day operations, but it opens up your personal assets to business liabilities.
Finally, as most business books, mentors, and gurus will tell you, you should be treating an IRS audit as an inevitability, not a chance event. Even if your small business is never audited, you should keep your books and receipts clean and prepared as if it’s just around the corner. If an audit does come one day, you’re going to be in a much better spot if you can show one account with all accounts payable (expenses) and account receivable (revenue) in one place without having to go above and beyond to prove that your recent business travel expenses weren’t for personal pleasure.
Depending on the organization you work with, opening a business bank account doesn’t have to just be about having a place to process your business financial transactions. Some companies will provide you access to experts that can help guide you through the (at times complicated) landscape of growing your small business. This is especially critical if you are looking to grow your business internationally in the future. You will have not only new taxes to understand and prepare for (such as VAT, or Value Added Tax, for goods in the UK), but you may have new laws to navigate as well.
When working internationally you will undoubtedly need to manage foreign currency exchange for your payments and revenue. While converting currency can absolutely be simple, doing it well requires a bit of research beforehand. Without a business bank account and company that are able to support your foreign currency needs you are likely to eat into any international profits unnecessarily. Amazon and your personal bank are likely more than happy to process foreign currency exchanges for you, but doing so is not their primary business. This means that their fees are going to be much higher (to account for the “convenience” they are perceived to be providing you), and they won’t be able to offer a competitive rate compared to an organization that specializes in FEX (foreign currency exchange). At times you may be paying 2-3 times more than you need to when moving money between countries.
*Note: You will also want to avoid what is often referred to as “double exchange fees” by converting currencies too frequently/unnecessarily. For example, if you earn revenue in Spain your business is going to need to pay taxes that year in Spain as well. Transferring your revenue from Euros to USD as soon as you receive it, only to pay to convert it back to Euros again come tax season is a huge, needless cut into your overall profit margin.*
Opening a business bank account isn’t particularly hard to do. You will need a bit of information (which varies by country), but just about anyone can apply for a business bank account and there are virtually no downsides to starting one. Simple as that.
When you are setting up a business bank account for the first time, here is what many organizations will require:
- Business name
- Doing Business As (DBA) name
- Your (the owner’s) Social Security number (SSN)
- Business license
- Any other organizing documents (e.g., Articles of Organization)
- Employer Identification Number (EIN)
PingPong gives small business owners and Amazon sellers the tools they need to successfully manage their banking and finances at an international scale. Set up a free account in as little as 1 day and begin your journey into new Amazon Marketplaces. Experts at PingPong can help you sign up for a new account and begin operating internationally in one day.