What is a business without a means of collecting payment? After kick-starting your business, you will need a business bank account to collect payments from your customers.
It is not ideal to use your personal bank account to collect payments, hence, in this article, you will learn about the advantages of having a separate account for your business and how to open a business bank account.
What is a Business Bank Account?
A business account is a type of bank account that is opened specifically in the name of a business i.e the name of the business will appear when customers or vendors want to send money and not the name of the founder.
Every financial transaction in the business is meant to pass through the business account so that financial records are organised and easily traceable for accounting, auditing and tax purposes.
Business accounts usually come with higher transaction limits and business-specific features that help manage and grow a business.
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Why you need a business bank account
It gives your business credibility
Your business name is RedCarpet Events. A customer hires you to organise an end of the year Award ceremony. You’ve given them a budget of 23 million Naira.
It’s time to make payment. Then you provide your personal account details “2044871124 Chidinma Ogburuzor, Intergenerational Bank.”
Most customers will not agree to pay to a personal account because they know that if anything goes wrong, it may be difficult to hold the business accountable, recover their funds, or verify the legitimacy of the transaction, as personal accounts lack the transparency and legal protections associated with official business accounts.
In a situation like this, you are also positioning your business as being unprofessional and potentially untrustworthy, which could damage your reputation and deter future clients from engaging with your business because words spread fast.
Bolaji: How far guy, you sabi any event manager wey fit help us handle our office AGM meeting?
Aniete: Omo, I for recommend RedCarpet Events oo, but bro, dem no get corporate account. Once you send money like this, anything fit sup.
Bolaji: Ahhh, make I just use Jaburata Events like that. I no too like wahala.
Access to business loans
As you grow your business, you might need loans to expand. To get access to loans as a business, you will be required to provide your statement of account for a specific period.
This is necessary for investors or banks so they know how healthy your business is. Producing a personal account statement sets you up for rejection because no serious investor will invest in a business without a business bank account.
Tax and Audit
One of the major advantages of having a dedicated business bank account is that it simplifies your tax filing process.
When your personal and business finances are mixed, it becomes difficult to track business income and expenses accurately. This can lead to mistakes during tax filing and could result in penalties or trigger an audit by tax authorities.
A business account creates a clear financial trail. It allows you (or your accountant) to easily pull records, categorize transactions, and prepare accurate financial statements when calculating taxes like VAT and PAYE.
In the event of an audit, having a well-maintained business account gives you an added layer of credibility. It shows that you take your business seriously and helps tax officials verify your financial activities without unnecessary delays or suspicions.
In short, separating your business funds through a dedicated business bank account reduces risk from penalties, saves you time, and ensures you’re on the right side of the law.
It reduces risk of theft and financial mismanagement
If you build a business where your customers feel it is okay to send money to the personal account of the CEO, in doing so, you are giving your staff funny ideas. You are creating a loophole where it makes it easy to steal from your business.
When you are not present, a staff member could tell a customer to make payment into their personal account. Since you have made it a norm in your business, there would be little to no resistance from the customer.
Also, a business bank account comes with certain features that are not available in a personal account. For example, the multi-user role feature allows the purchasing manager to log into the company’s business account with his own login credentials and make payments for certain goods. After making payment, he calls the finance manager to approve the payments.
The finance manager then logs into the bank account with her own credentials and approves that payment. Without the Finance manager’s approval, the funds won’t leave the account.
At the end of the month, the company’s accountant can log into the bank account with his own credentials to carry out an audit. From the accountants dashboard, he can see the activities of every individual that has access to the account. This feature can be set in a way that the accountant who is carrying out the audit can only view the transactions in the account but he cannot initiate, modify or approve transactions.
Requirements to open a Business Bank Account in Nigeria
Before you can open a business account in Nigeria, your business must be registered with CAC. If you have not registered your business, the first step is to generate a business name and conduct a business name search to see if your desired name is available.
Do you already have a registered business? If yes, you can proceed to check the other requirements for opening a business bank account below;
- Business registration documents. You will get this from GrowthPal after registering your business with us.
- A search fee (it ranges from ₦9,000 to ₦12,000)
- A valid means of identification (Your National Identity card, NIN, is the most preferred).
- The CEO’s Bank verification number.
- Passport photographs.
- Utility Bill that shows business or home address.
- Business Stamp (most banks request for this).
How to open a Business Bank Account
Choose a Bank
There are several commercial banks in Nigeria. Choose one that aligns with your business needs in terms of fees, network availability, solid internet banking options, customer service and SME support.
Download the Business Account Opening Form and Fill It
Most banks now have their business account opening forms online. It is better to download the form online, print it out at and fill it before taking it to the bank.
This will help reduce the number of times you need to visit the Bank and join queues when you should be focused on your business.
Fill the account opening form and tick all the necessary options you will need.
Visit the Bank with the requirements
Take all the requirements listed above to the bank you’ve chosen to operate your business account with. You can reach out to your chosen bank via phone, email or social media to confirm if there’s anything extra that will be needed not listed above.
Submit photocopies of your credentials
Once you are done with filling the form, you’ll need to submit the photocopies of your credentials.
Sign Reference form
The reference form needs to be signed by two individuals who own a current account in Nigeria and have maintained it for at least 6 months.
The reference could be signed by individuals who own an account with the same bank or with different banks, provided the accounts meet the required criteria and the individuals can vouch for your credibility.
Set up Internet Banking
While filling the account opening form, there’s usually an option to tick if you want internet banking enabled. Select this option to ensure that you can manage your business bank account online.
After successfully filling the account opening form and submitting your credentials, wait for approximately 3-7 working days for your business bank account to be opened.
An SMS or email containing your bank account number will be sent to you.
5 Things To Do After Opening your Business Bank Account
Get a Token
A token serves as an extra layer of security for your bank account. Even if your internet banking login details are compromised, unauthorized users cannot login to your account if they do not have the token device with them.
Once your business bank account has been opened and internet banking service activated, get a token for yourself and every user that will have access to the account.
Create accounts and configure user roles
Set up individual user accounts for authorised staff such as the accountant, procurement officer (as the case may be), and assign specific roles and permissions. This ensures that each user has access to only functions necessary for their duties.
Update your business details
It’s time to update your invoices, flyers/stickers, website or social media channels with your new bank account.
You should also notify your existing customers and vendors to use the new business bank account.
Keep business and personal expense separate
Discipline yourself to not use the funds in your business account to cover personal expenses, this ensures accurate business records, makes tax reporting easy and maintains the credibility of your business.
Set Up a Bookkeeping service
Now that you’ve set up a business bank account, it’s equally important to use a Bookkeeping service to track every financial record. Bookkeeping is the process of recording all your business’s income, expenses, and other financial activities in an organized manner.
Most bookkeeping softwares comes with inventory management; this feature helps you to keep track of the number of goods or services you have sold within a period of time. It keeps you abreast of when you need to restock certain products, shows you your best selling products per location (for businesses with multiple locations) and lots more.
You can get started with Zoho books or Quick books.
Frequently asked questions (FAQ)
Can I open a business bank account without CAC registration?
No you cannot. Most Nigerian banks require a CAC business registration certificate and other supporting documents to open a business bank account. Some Fintech services like Paystack might allow you to create an account to receive money in your business name but it comes with a lot of limitations.
How long does it take to open a business account?
If your documents are complete and you filled the form correctly, it could take 3-7 working days. One factor that could delay the account open process is the confirmation of your reference signatories. Your bank will contact the corresponding bank of your referees to confirm their willingness to act as references for your business bank account.
Can I open a Business Bank Account Online?
Yes, banks like Fidelity Bank, Stanbic IBTC and Wema bank allow you to open a business bank account online. However, the account may be restricted to some certain features until you visit a branch to complete your registration.
Is there a minimum account balance required for a business account?
The requirement to maintain a certain account balance for business/corporate or current accounts in Nigerian banks is no longer mandatory.
Opening a business bank account for your business not only makes you appear professional, it puts you ahead of so many other businesses in Nigeria. It also helps you reduce the issue of staff fraud to a large extent.
If you enjoyed this article, also check out our articles on how to register a trademark in Nigeria and how to file annual returns with CAC.
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