What is an Operating Account, and Should You Have More Than One?

By Matas Pranckevicius

Content Manager, Relay

Managing your finances might not sound exciting, but it’s absolutely vital. 🔑 As a business owner, keeping track of your operating account is crucial to your business success, which is why most companies have at least one account dedicated just to deposit receivables from customers and to pay vendors and suppliers.

Relay is a banking platform that helps small business owners take control of their finances. With Relay, business owners get more visibility into their day-to-day cash flow and are able to make more informed, data-driven decisions. 📊 In this article, we cover what a business operating account is, how to set it up, what type of account you should use, the benefits of having multiple operating accounts, and how your operating account can provide valuable insights into your business.

In this article:

What is a business operating account?

An operating account is a business checking account designated for operations. 🛠Revenue and receivables from your business get deposited into this bank account, and all operating costs are paid through this account as well. 

“Oh, so it’s my checking account,” you might say. Not exactly! As a business owner, it’s possible that you’ve run into different types of bank accounts, like checking accounts, savings accounts, and money market accounts. You don’t want to simply turn any of these into your operating account. You need to be strategic with which accounts you use and how you use them.

If you want to use your checking account as your operating account, there are additional things you’ll want to consider. For example, Relay’s business checking accounts go beyond traditional accounts, as they’re designed to help you manage your financial operations. Relay gives you deep integrations with accounting software like Xero and QuickBooks Online. You can also automate your accounts payable management, or connect Relay directly to your payroll platform with our Gusto integration to get alerts if you’re ever at risk of missing payroll. You can even invite multiple users to collaborate 🤝 on banking and control their access with role-based permission levels, keeping your banking secure.

Most standard checking accounts don’t offer these features to small business owners — but operating accounts do. Your operating account should be the primary bank account that ensures your day-to-day operations run smoothly, and you can make payments and manage deposits without issue.

For context, there’s something called a “trust account,” which is more common in the legal profession 👩‍⚖️ specifically. It’s typical for law firms to have both operating accounts and trust accounts. With operating accounts, clients pay money in exchange for the firm’s guarantee that they will be available to the client (also called a retainer). With trust accounts, the money is an advance for future services. Money put into trust accounts does not belong to the firm and should not be commingled with the law firm’s existing operating account.

Why do law firms do this? Well, one reason is that it’s important for their cash management that they don’t comingle the money within these two accounts. This further highlights why a proper operating account is necessary for your business.

A quick example of how to set up your account

How exactly you manage your operating account will depend on your business, needs, and goals. You can have one account or several. If your business doesn’t have a ton of transactions, then you might be just fine with a single operating account.

However, some businesses do better by compartmentalizing their transactions and having multiple bank accounts. For instance, you might want to open individual accounts specifically to manage: 

  • 👷 Payroll

  • ✈️ Travel expenses

  • 💲 Taxes

  • 👩🏻‍💻 Advertising and marketing expenses

  • 📎 Office supplies

  • 👩‍⚖️ Legal fees

  • 💳 Loan or credit card payments

  • 🧾 Sales and returns/refunds

  • … and anything else that you’d like to track!

This approach is similar to the digital envelope budgeting method, where you categorize your spending into buckets. (More on this in a minute.)

With Relay, you can compartmentalize your spending in up to 20 accounts per business — without any account fees.

Where to keep your business operating account

When setting up your operating account, it’s best to pick a business checking account with no account fees or minimum balances, and one that has multiple payment methods to help you move cash in and out of your business. This will enable you to manage all your day-to-day business banking without having to worry about bank fees or transaction limits. 

Note: A standard savings account won’t be a good fit for an operating account, because they have limits on deposits and withdrawals, and they’re meant to store money you don’t plan on touching for a long time.

Benefits of having multiple operating accounts

Yes, you can make it work with one account, but keep this in mind: When you only have one operating account, it’s harder to know at a glance how you will eventually need to allocate all of this money toward different expenses.

As a business owner, you need to earmark enough to pay a number of operating expenses, and having multiple accounts makes this process easier. Here are some of the biggest benefits of having multiple operating accounts:

  • 📂 It’s easier to stay within your budget: Designate and manage your funds when they’re separated into various accounts. For instance, if you have an account designated for your business taxes, you’re not likely to think that’s liquid cash. However, if all funds are in a single account, you may spend more than anticipated.

  • 👁 It’s easier to eyeball tax deductions: One example is perhaps an “R&D account” where funds are designated to develop tools and software to improve processes for your business and others. Expenses here could be used to claim the R&D tax credit, and if all expenses are within this sub-account, it’s much easier for your accountant to tabulate your credit (and ensure you claim the proper amount).

  • 💵 You’ll have greater visibility into cash flow: Many small businesses use a sub-account specifically to measure things like profit and cash flow. Instead of measuring what’s left each month or quarter after the fact, you’ll proactively stow away margins and treat them as a priority.

  • 📚 Your year-end accounting will be faster and easier: While you don’t need accounts for every line item, separating accounts into the biggest categories makes your year-end reconciliation and filings much easier (for you and your accounting solution or bookkeeping professional).

Remember, cash flow issues are one of the top reasons businesses fail. In fact, about 82% of business failures stem from poor cash flow management. Setting your business up for success by keeping your finances organized into compartments, with systems and processes for managing cash, will help you understand what your cash position is at all times.

Understanding your business operating account

It’s not just about staying organized. Having an operating account can also help you gain valuable insights. When you understand your business operating account well, you can improve your business operations in many ways.

  • You can anticipate cash flow problems to mitigate risk and be proactive about finding a solution.

  • It can give you insights into your company and help you make strategic decisions. It may bring light to things, like excess cash that could be invested in the future.

  • You will feel confident knowing you have funds for near-term and future expenses, like payroll, taxes and rent. This will help avoid extensive use of credit or the inability to pay employees or expenses on time.

  • It will allow you to reduce unnecessary expenditures and drive profit for growth by identifying seeds of future profitability.

When you know your numbers and keep a finger on the pulse of your business financials, you can run your business more proactively (and efficiently) and better avoid unpleasant surprises.

What’s the difference between an operating account and a balance sheet?

Your business’s balance sheet ⚖️ gives you a snapshot of your current assets and liabilities. So, it’s not the same thing as an operating account. Rather, how you manage your operating account(s) will be reflected in what your balance sheet tells you. This is because a balance sheet will show what’s currently in your business checking account.

Another stark difference is that balance sheets aren’t always current, since businesses might prepare them once a month, quarter, or even once a year. An operating account, however, will always be 100% current.

What’s the difference between an operating account and an expense account?

An operating account encompasses all of the expenses a business needs to operate, and it can also be used to manage incoming payments. An expense account, on the other hand, reflects only spending. So, an expense account is an operating account, but an operating account is more than an expense account.

Remember what we said earlier about compartmentalizing expenses? You can have dedicated operating accounts for specific types of operating expenses, like software subscriptions and payroll. This is especially easy to do with Relay, which helps you separate and organize your cash, auto-categorize it, and speed up your bookkeeping.

A smarter operating account for your business 

Unlike most traditional brick-and-mortar business banks, you can think of Relay as a smart operating account designed to help you master your day-to-day financial management, with no minimum balance requirements or monthly fees.


  • Gives you more visibility into your cash flow and transaction data so that you can better understand the financial health of your business.

  • Enables secure collaboration between your team and your advisors, like accountants or your legal team.

  • Integrates with accounting tools and accounts payable features to help you automate your day-to-day financial administration. 

If you're ready to make the switch to a digital banking platform and open a smarter operating account for your business, bank with Relay. It takes less than 10 minutes to apply and you can check it out for free. Try Relay today.