Bank Services for Small Businesses

Today we’re going to talk about bank services for small businesses. We’ll talk about some accounts that you typically would want to set up for banking services. And we’ll also talk about the necessity of the connection with the bank and how having the right bank setup for you can really set you up for some success in the future. 

Do You Need a Business Bank Account for Small Business?

When you need a new bank account, you typically would start by just going to the bank where you do your normal banking for your personal stuff. But to get bank services for small businesses, your personal bank may not be the right fit. They may not have the right services or products that you may need. A little bit of investigation upfront will go a long way. 

We often talk to clients about what kind of banks are out there and do some comparisons. You can also talk to other professionals to see what their experiences are.

The difficulty of changing banks midstream when you’re working and operating can be very, very difficult on a small business. So I always suggest, try and get a really good feel as to whether that bank is going to work for you long term, not just today, but 5-10 years from now. Get comfortable with the bank upfront. Hopefully, it’s a long term relationship that you don’t have to worry about.

Bank Services for Small Businesses

When you’re looking for a bank, you need it to be user friendly. Look at what industries you’re in and what services that you may potentially need going forward. For instance, if you have an account that needs some merchant services that are attached to it, does your bank provide that? You should also make sure that either the bank’s fees or the way that the bank operates is in line with you and your industry. 

Checking Accounts

An operations account is an account that our clients often set up. This is where all the bills are going to be paid from. This is also where you potentially will receive your revenue. So essentially all of your income and your operational expenses are in this operations account. It’s a checking account, your bread and butter. Your customer deposits and expenses will get paid out of it as well. 

You may want to have a second checking account just for payroll. To have a payroll account set up, in addition to the operating, allows you to control the money that’s going to the payroll account. You would have to move the money over every time there’s payroll. But it also mitigates some of the exposure that you have if you’re issuing payroll checks to your employees. 

Say you issue a check to an employee and that employee does not receive the check. Maybe it got lost in the mail. Someone took that check and now has the bank information on the employee’s check. That information could basically be replicated and fraud could happen. 

When we’re looking at how much money is exposed, in most instances, the money that is exposed in the payroll account is really only the latest paycheck run. It may not be an issue if all your employees are getting paid direct deposit. But it would be a problem if you are paying people with a physical check. It also could help if you have an outside payroll service doing payroll where they’re pulling money for taxes, employee checks, etc.

Savings Accounts

The next kind of account might be a savings account. This is really helpful if you’re looking to hold money in the company for maybe some expansion of the company, a capital improvement, or if you wanted to save money for taxes.

It’s just an account to house some money for larger expenses that may come down the road. The money comes out of your operating account and you’re stashing it away. You’ll get a little bit of interest, but interest rates are very low. 

If you have more significant money that you don’t want to touch for a long period of time and want to invest it a little bit into the market, you could get into some investment accounts as well. We don’t suggest holding a really large number of dollars within the company in investment. It’s probably better to pull some of that out to the owners and invest it on your own. But you do have an opportunity there if you are maintaining some larger balances and need to keep it in the company.

Not all financial institutions provide or offer investment accounts, though. So if you are looking to do that, you may want to go with a bank that does offer those kinds of financial services.

Develop a Relationship with the Banker

Once you decide on bank services for small businesses, having a relationship with the banker can be very helpful because they can guide you through all the different processes for setting up accounts. You may also need loans, lines of credit, and credit cards. There may be other types of products that are needed on the other side of the ledger.

Having a connection with a banker can really set you up long term to excel, because if they have something new that comes out, or or something happens for your company that you need help with, the relationship will be of value to you. For instance, with COVID, a lot of small businesses were impacted and were able to receive some loans or PPP funds. Having a relationship with the bank that was able to provide that to them was really crucial at that time.

Choosing the right bank services for small businesses can put you on the path to success. You’ll want to start out with doing research to find the right bank, then decide on which accounts will be most beneficial, and finally develop a relationship with your banker.

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