Your Bank Can Help!
If you haven’t really thought about banking, you may be underutilizing this incredible resource available to business owners. Let's explore some simple banking strategies to make your cash management smoother.
Prioritize Regular Bank Account Reconciliation.
A disciplined daily or weekly reconciliation is the key to maintaining financial stability. This involves meticulously tracking transactions and ensuring alignment with bank records. Regular checks help you catch mistakes quickly and rectify them promptly.
Choose Commercial Bank Accounts for Transparency.
Opting for commercial bank accounts can be particularly beneficial for businesses. The enhanced transparency offered by these accounts provides detailed insights into financial transactions and operations, a valuable asset for businesses closely monitoring their cash flow.
Prioritize Service Quality Over Bank Size.
The prevailing belief is that smaller, local banks are always superior. However, choosing a bank should be based on service quality rather than size. If dissatisfied with the service at your current bank, consider asking if they have someone specifically assigned to working with business development. Then, if you aren’t able to receive the service you need, switch banks.
Open a Business Account at a Commercial Bank.
Opening a business account at a commercial bank can have strategic advantages, including the ability to borrow against account balances and the convenience of online wire transfers. Commercial banks are generally more stable than credit unions.
Yes, commercial banks can be more expensive, but the benefits of commercial banking often outweigh the costs. In addition to regular checking and savings accounts, large commercial banks can offer options like sweep accounts, remote online wire transfers, and software that allows online access to a team of employees. And maintaining a sufficient balance often sidesteps fees.
Have multiple accounts.
The number of accounts depends on the type of business, and what stage your business is currently in. But the basics are at least a checking and a savings account. Basically, you leave the majority of your funds in savings, and keep only the amount that you need for day-to-day transactions in checking. The savings account becomes a cash reserve for when you need it. And psychologically, when you see a low bank balance in the checking account, you are reluctant to overspend.
A third account could be for “profits and taxes”, where money to pay yourself and future taxes are kept. Some companies keep a separate account for “committed funds”, or funds that you want to ensure are available when you need to pay out for specific obligations. Another account that can be helpful is a “deposit only” account, which can be accessed by trusted people outside the company.
Your bank can be a valuable tool as you move forward towards maximization of cash flow and profits. Here's to a successful journey in fine-tuning your financial strategies for enduring success!
Is there a cash management topic you'd like to learn about? Contact me at [email protected] or LinkedIn at linkedin.com/in/dsafeer/ to introduce yourself, share ideas, or ask me questions about managing your business's cash.