For me, the most exciting thing about business banking is interacting with entrepreneurs — learning why and how they got started, seeing how they give it their all through good times and bad, and working with them to move their businesses forward. Entrepreneurs are problem-solvers at heart and busy by nature — a recent poll shows they often work 60 hours a week, if not a lot more! — so they’re continually looking for ways to efficiently ensure the success of their businesses.
For entrepreneurs, a bank provides solutions for a number of business-related tasks and challenges. It’s a place to deposit money, of course, but it’s also a place to get cash management and merchant assistance. Just as important, it’s a place for business owners to find an ally who will support their business goals and needs. Through specific accounts, features and customer service, banks can help business owners be more efficient and even help take some of that work off their plates!
And it all starts with opening the right business bank account — emphasis on business.
Business Accounts: The Basics
If you’re an entrepreneur, establishing a separate business bank account from your own personal money is an essential step in running a successful business, and is even required in some instances. We’ll touch on that a bit more later, but first, let’s go over the two most common types of business accounts: business checking and business savings.
Business checking accounts are used more for day-to-day transactions, such as purchases or bill payments. These accounts allow you to make deposits and withdrawals, and often come with checks and/or debit cards.
A variety of checking accounts are available to meet your unique needs, factoring in:
- the type of business you have (sole proprietor, nonprofit or public entity)
- the amount of transactions you need to make per month
- if you’d like to earn interest
Checking accounts are great choices for managing your money. Depending on your business, you might even want to have multiple business checking accounts. I’m a believer in having a separate checking account for operating expenses, payroll and taxes. It provides structure and makes accounting easier, not to mention it keeps your operating money safe.
Business savings accounts are generally used for storing money and earning interest.
Business owners save money for a number of reasons, such as retirement, large purchases, getting out of debt or hiring purposes. And, of course, we’ve all heard the old adage, “Put your money away for a rainy day.” While I agree with the principle, I’d like to take a little liberty and adjust the phrase a bit: “Put your money away for the sunny days.” In other words, look forward to the goals you’ll reach with what you save. And, thinking on the bright side (pun intended!), if it rains you still have the money for the rainy day too.
A variety of traditional savings accounts and other types of savings options, such as money market and sweep accounts, are available for your consideration, factoring in:
- how much interest you’d like to earn
- the number of transactions you plan on making from the account
- the balance you intend to keep in the account
- if you’d like to sweep funds from your business checking into an account that earns more interest
Before you open any business account, always do your research. Fees, minimum balance requirements and interest rates for both checking and savings accounts vary from bank to bank. Features are also important to consider. Do you need an account that provides detailed analytics? Do you want robust online banking and mobile app platforms? Do you need a business debit card? Do you want to sign up for alerts when your balance is nearing your minimum? Make a note of your must-haves.
Beyond the Basics: Cash Management and Merchant Services
Business accounts can also come with different features and options to keep tabs on your cash flow, make payments, detect fraud and more. Depending on the checking or savings account you choose, these services might come included, or you could be given the option to upgrade.
Let’s start with some common cash management solutions that are available to help you maximize your cash flow, services such as:
- Automated Clearing House (ACH) origination, which allows you to electronically collect ACH payments from your customers’ accounts for deposit into your business account. It also allows you to transfer funds electronically from your business account to pay bills or to even pay your employees.
- Remote deposit capture is a means to conveniently make deposits directly to your bank from you place of business, using a desktop scanner and online banking.
- Online wire transfers are a method of electronically transferring funds from one person or institution to another. Using your bank can result in reduced wire transfer fees, and because you can send wires from your own desktop, it eliminates the need to go into a branch.
- Positive Pay is an automated service that helps you detect check and ACH fraud and thwart fraudulent entries immediately.
Merchant services give businesses the capabilities to accept credit or debit card payments. In-store, online and mobile solutions are often available. As credit and debit card payments become more and more prevalent, merchant services have become a must-have for many businesses. For a cost-effective fee, you never have to turn away business because you can’t accept the customer’s form of payment. You can even upgrade your service to include loyalty programs, such as rewards, cash back and sky miles, which are great ways to entice customers to your business.
In addition, merchant services provide purchase protection for customers, to ensure their information is safe, and for your business, to ensure your reputation is protected against unsatisfied customers or even fraudulent claims.
Navigating merchant services can be tricky. Make sure you find a bank or a provider that fits both your immediate and long-term needs. Shop around, and be sure to review your merchant services rates at least once a year with your banker.
3 More Reasons to Open a Business Account
It’s always best to open a dedicated account for your business. Not only do you get the services and solutions mentioned already, but a business account can also provide:
1. Limited liability protection
If you have a limited liability corporation (LLC), you must keep your personal and business finances separate. Doing so minimizes the risk of personal liability for business debts. For example, if someone sues your LLC business, they cannot access your personal funds. While separate accounts are required for LLCs, it’s actually good advice for all types of businesses — sole proprietors, doing business as (DBAs) and others. Keeping your accounts separate keeps everything nicely organized.
2. A higher level of professionalism
As mentioned above, a business bank account can give you the ability to write checks or send payments via ACH or wire, from the business itself. This makes customers feel like they are buying from a brand versus purchasing from a person. It is far more professional than asking customers to make out checks to your name.
3. Credit options
Some banks provide an option for a line of credit that you can use in an emergency. Some offer equipment loans and commercial real estate loans that allow you to afford expensive machinery for your line of work or give you a location to conduct your business. Some banks also offer business credit cards that you can use to start building a credit history if you’re a start-up business.
Why You Need a Bank That Values Relationships
As you can see, business owners have many banking options, and lots to consider when establishing a banking relationship. Every bank will offer something a little different. Take your time perusing the various options until you find the right bank for your business.
Most importantly, find a banker who has your best interest at heart. That’s the absolute best advice I can give you because, when you work with a bank and a banker that is focused on relationships, they work to ensure that the bank’s products align with your needs throughout the entirety of your banking relationship, not just at account opening. They are there to advise you as you grow your business. They should be prompt in their response when you call on them. They are there to serve you and be a part of your life and provide a personal touch to your banking.
If you have any questions about business accounts, business solutions or anything business banking-related, feel free to contact us. Together, we can move your business forward.
Matt Linford is a treasury management relationship manager for Bank of Utah. He enjoys being in the community, meeting business owners, and learning about their goals. Prior to his career in banking, Matt spent eight years as a full-time youth soccer coach. He coaches in his spare time now and loves participating in a variety of other outdoor activities.