A bank deposit is the money you have put in your business bank account. The process of doing it is called depositing money.
A bank deposit can also be called a company deposit. It’s considered a very safe way of storing your money.
You can have a checking or savings account, where you can withdraw money whenever you want using bank cards or checks. This is called demand deposit. You can also go for what’s called a time deposit—where you have to store the money in the bank for a certain amount of time. Usually you get a higher rate of interest on a time deposit account.
Set up a business bank account for your bank deposit
Whichever type of bank account you go for, you should set up a separate business account so you don’t mix your personal finances with your business finances.
Having a clear separation makes it easier to do your bookkeeping, and to check that your bookkeeping matches up with the actual money going in and out of your bank account. This is called a bank reconciliation.
Bank deposits are a liquid asset
Assets is a term used about things that your business owns. Bank deposits are one type of asset. Other forms of assets are for example, equipment, outstanding invoices waiting to be paid, stocks, and property.
The term liquid asset refers to an asset that is easy to convert to cash. A bank deposit is a type of liquid asset, since it’s very easy to just withdraw the money. A solid bank deposit is a great for being able to cover your immediate financial needs.
An example of an illiquid asset is property, since it’ll most likely take a while to sell the property and then also to receive the payment.
Having good liquidity—a good store of liquid assets—is important for your business, since it means you’re able to pay suppliers or employees and make investments. Check out the ultimate guide to liquidity and cash flow.