Business banking is when a third party (a banking provider) manages a company/business’s finances. It involves selecting a banking provider to store your business funds, manage your business bank account, apply for loans for your business, and obtain other financial services.
Business banking focuses solely on providing banking services to business clients. The providers operate as separate units of financial institutions exclusively for corporations and businesses of all sizes.
The bank provides business owners with advisory and financial services and acts as a medium for all business-related financial transactions. Business banking is ideal for entrepreneurs and businesses of all scales looking to get financial guidance and better manage their financial dealings.
What Are Business Banking Services?
Different business banks offer various financial services to meet an organization’s needs. Here are some standard services you can expect:
- Bank transfers
- Treasury services (payroll services/deposit services)
- Saving and checking accounts
- Merchant services (credit card processing, reconciliation, reporting, check collection)
- Bill payments
- Loans
- Lines of credit
- Fraud protection
Why You Should Get A Business Bank Account
As a business owner, you almost always have a lengthy to-do list to tackle. No matter the size or type of organization you run, optimally managing your business finances should always be top of the list.
Keeping track of your business’s finances can be stressful, but a business bank account can help ease this burden. Here are a few things a business bank account can do for your company:
1. Organize Your Finances
No matter your business type or size, you will have to report your revenue and expenses when it’s time to pay taxes. If you use a personal bank account for your business income, you will have difficulty organizing your finances when the need arises.
A business bank account helps you separate your personal finances from your business income, helping you keep track of all business-related payments, taxes, billing, and more.
2. Track Cash Flow
Poor cash flow management can significantly impair business growth and productivity and ultimately cause your business to fail. If you do not have a thorough awareness of how much cash is coming in and going out, you might not be able to secure lines of credit, stay on top of your bills, buy inventory, and pay your employees timely.
As a small business owner, this is not a risk you should ever be willing to take. Having a business bank account helps you effectively track your cash flow and have a bird’s eye view of your business’s financial standing at all times.
What To Consider When Selecting A Provider
Not all banking providers are the same, so it’s essential to do your research and weigh all your options before opening a business bank account. The type of account you open also depends on the size and type of your business and the services you will require from the provider.
Here are a few things to consider when selecting a banking provider.
1. Banking Fees
Each provider has a different fee package, from overall monthly fees for all services to any additional/hidden fees charged once you sign a contract or obtain a particular service. Make sure to ask each potential provider for a detailed breakdown of their banking fees before hopping on board.
2. Features & Services
Whether it’s a business line of credit, merchant services, or maintaining cash flow, business banking providers offer various features to help manage your business’s finances. Make sure to ask about what services they provide and how they can help you.
3. Deposit & Transaction Limits
Many business checking accounts limit the amount of cash you can deposit at one time and the number of transactions you can conduct. If you reach the capacity, the bank may charge additional fees for each transaction or additional money you deposit.
It’s important to choose a provider whose limits align with the average number of transactions you make and the revenue you expect to generate each month.
4. Online Accessibility
Handling your business’s transactions online makes the job much easier, quicker, and more straightforward. Make sure the banking provider you choose has an effective online banking system to help you track your finances anytime, anywhere.
How To Open A Business Bank Account
Once you’ve selected a trusty business banking provider, and are ready to open your business bank account, here are some things you may need.
- Your business license (if applicable)
- Social Security Number (SSY)
- Business Tax ID or Employer Identification Number
- Your business’s Articles of Organization
- The minimum deposit amount (if required)
If you’re opening a bank account in person, carry all these documents. If opening online, you may be required to upload scans, email, or fax your documentation to the bank.
Interested in learning more? Check out our article on banking tips for small businesses.