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Business Finance Management
September 13, 2022
Opening up a business bank account is necessary if you’re planning on launching a startup as an LLC or intend to operate as a sole proprietorship. But how do you choose which bank is best for your business?
Do you want an online bank or access to a brick-and-mortar location? What fees are you willing to pay? Do you want a return-on-investment savings account? What about direct deposit?
In this blog post, we will explore how to choose a bank for your business. From interest rates to fees and customer service, we will cover everything you need to know to make the best decision.
The minute your business has an EIN (employer identification number), you can open a bank account. Unincorporated companies do not legally have to open a separate business account, unlike incorporated companies. Regardless of your company’s business structure, having a business account is a valuable and beneficial tool that all founders should utilize.
It’s not unheard of for founders, especially sole proprietors, to use their personal bank accounts. However, separating your finances from your company’s makes it easier to track business spending accurately.
If you’re not paying close attention, your money and spending can blend with your business money. Suddenly, you don’t have enough cash to pay a vendor because you thought the extra money lying around was from your reserves and spent it on something else.
A business account is also the best way to organize, track, and allocate funds for your payroll, accounts payable, and other recurring expenses. This makes it easier to manage your monthly budget all in one place.
You can’t apply for a business loan without a bank account for your business. Financial institutions want to deposit funds directly into your business account; this assures the bank that you’ll use the funds for business purposes.
Think of all the decisions you’ve made regarding your business. When deciding which investors to work with, you didn’t jump the gun and pick the first interested party you met with, right?
When choosing a bank for your business, you should approach it with the same caution. What to look at in a business bank account depends on your individual needs, operation, and how you plan to use the account.
So, with that in mind, let’s jump into what you should consider when shopping around for a business account.
Depending on the size and structure of your business, you may have different business banking needs. For example, if you’re a sole proprietor, you may only need a basic business checking account.
Suppose you have a more complex business structure or plan on expanding soon. In that case, you may need various banking products and services such as business savings accounts, merchant accounts, and open lines of credit.
Business account necessities include:
Similar to individual checking accounts, business accounts can come with fees. For startups, watching how much money is going towards fees from all aspects of the business is essential.
Most important fees to look at:
Some banks limit the number of transactions per billing cycle and then require a fee to process each transaction over the limit. Generally, online banks have fewer fees, but consider how you can access your money. Brick-and-mortar banks mean in-person access if needed.
Growing your business requires cash. Choosing a bank account that grows with interest is an easy way to elevate your cash reserve on the side. However, compare interest rates with any fees associated with the account to ensure they aren’t canceling each other out.
You may not need their support often, but when you do, you want to be able to find help quickly. Customer service employees should be knowledgeable, accessible, and have safeguards in place to ensure no one unauthorized can access your account. When vetting different banks, think of a few scenarios you may need a bank’s customer service department and ask how they would be able to help.
Larger banks have more expansive customer service teams. However, they deal with hundreds of clients a day. Not to mention banks with high customer volumes often automate their services. If you prefer more active, 1-1 customer service, there are banks explicitly focused on smaller businesses and startups. Customer service reps at these banks typically have more expertise working directly with founders’ inherent needs.
Similar to basic checking accounts, certain banks run promotional offers for new customers. Check banks you’re interested in to see if they’re running a current special. Bank offerings can include giving cash back bonuses to new customers for depositing a specific amount upon opening the account.
Banks sometimes require an account to carry a specified minimum balance at all times, or your account will be subject to fees. Minimums can range from daily to monthly, depending on the institution. If you’re unsure how much money you’ll have in your account, try to find a bank that works with small business owners over institutions that require a large minimum balance.
You want a bank that has robust security, especially if you plan on using online banking and ACH payments. Ask about their software, their security measures, and how they handle fraud. You don’t want to work with a bank that takes weeks to investigate fraudulent claims.
One of the best ways to protect your account from any fraudulent activity is by implementing a multifactor authentication process. Rather than rely on an email and password, only opt for a text or phone call authentications and fraud alerts. You want a bank that provides multiple levels of authentication and alerts for any attempted access from new devices.
If you’re just starting, having a physical branch is beneficial when learning how to manage your company’s money. You can work one-on-one with your banker in person, and it’s much more convenient to have deposit options. Banks with multiple ATMs around the country make traveling easier. Using your bank’s specific ATM eliminates ATM fees for cards not linked to their bank.
Banks keep your business transactions organized, but they aren’t able to track other vital aspects of your business’s finances. Bookkeeping and accounting are crucial parts of successfully managing your company’s finances. Your bank account shows how much cash is going in and out but doesn’t show you essential business health metrics like your burn rate.
You need a professional bookkeeper to understand how efficiently you’re spending company money to keep operations consistent. At Zeni, we use the power of AI combined with an expert finance team to offer bookkeeping and accounting services, an interactive dashboard, and daily, real-time account updates.
Our AI software also integrates seamlessly with other accounting software you might already be using and many banks so that you feel supported financially at any stage of your business venture.