A business checking account is like a baseball umpire. You’re barely aware it’s there until something goes wrong.
Maybe you’re part of the lucky minority that has enjoyed a seamless, hassle-free relationship with your bank for years. Congratulations!
But if you’re like the majority of business owners or operators who occasionally hit a snag with their banks – costing you money, sleep, or time that could have been spent on more productive matters – here are some ideas for smoothing things over and making your life easier when dealing with the people who handle your money.
Avoid High Fees on Your Business Checkbook
It’s no secret that recent reforms have put the banking industry on the defensive, and many banks are scrambling for additional revenue sources. As a result, administrative and maintenance fees have been creeping up. A reasonable monthly charge is expected, but when fees for returned checks (yours or a customer’s), wire transfers, currency exchanges and other normal activities are added in, the total amount at year-end can be substantial. So:
- Shop around. A community bank or credit union – if it takes business accounts – will generally provide more reasonable fees and provide a level of service acceptable to most small companies.
- Negotiate. If you’ve been a long-time customer, you might get be able to get a better deal than what’s “standard,” if the bank wants to keep your business. And think creatively. For example, maybe you can ask for a 24-hour grace period to cover NSF checks without penalty, or have the balance for no-fee checking reduced from the normal amounts (example, $6,000 instead of $10,000).
- Don’t bounce checks. Do you really need to hear that again?
Don’t Abuse Lines of Credit
If your banking relationship is fairly good (in the bank’s eyes), your company will eventually be offered a line of credit, perhaps a substantial one.
A line of credit can be a lifesaver in certain situations, but make sure whatever you borrow can be paid back quickly, in less than a year, or preferably six months. A good rule of thumb: Don’t use your line of credit for any projects or expenses expected to last more than a year, or 18 months, maximum. There are almost always better sources of funding.
Don’t be a Stranger: Get to Know Your Banker
Yes, you must. It’s tougher these days, with personnel changes hitting the banking industry as fast and hard as anywhere else, but you need to have at least one good contact – at the management level – at the branch where you conduct most of your banking. Make sure that person knows you by name and face.
When there’s a problem – a missed payment, a botched wire transfer, a legal action, or whatever else might come up in the course of your banking relationship, you’ll get more attention, and possibly a better action and outcome, than you would if you were talking to that person for the first time.
And when he or she does help you, bail you out, or just do something to make your banking life easier, be sure to send over a handwritten thank you note, or at least make a sincere phone call, thanking him or her for the aid.
Don’t be in the Dark
Here in the 21st century, there’s no excuse for not knowing exactly what’s going on in your business checkbook account.
Are you – or someone you’ve designated – carefully reviewing monthly statements? Maybe more importantly, is someone checking daily balances and account activity? (Seriously, if you hate doing it or just don’t have time, appoint someone to monitor accounts every business day.)
Virtually all banks offer mobile apps that will let you check your account on the fly. (If your bank doesn’t, it’s likely time to switch.) This will ensure that deposited funds are at levels high enough to avoid fees, that checks are returned for NSF reasons and, if applicable, that excess funds are moved to interest-bearing accounts.
Accelerate Your Receivables and Stop Worrying
The check is in the mail, right?
Even if it’s true, that can still cause you problems while you’re waiting for it to arrive and clear your account.
Three tips for getting your cash faster:
Invoice sooner. Get the invoice to the client immediately, preferably with the delivery of the product or performance of the service. “Net 30” can easily become net 35 or net 45 if you’re late sending the invoice.
Encourage – or insist on – electronic payments. Your bank can set this up for you in a day or less. (Be sure to understand what the fees are, and negotiate them down, if you can.) At the very least, you eliminate the time for mail delivery and the day of clearing activity, which adds up to three to five days, in the best case.
Consider invoice factoring. Factoring is a proven solution to all kinds of cash flow problems in many industries. An invoice factoring arrangement can have funds in your account faster – much faster than 30, 45 or 60 days.
MP Star Financial can help you get a better handle on your company’s cash flow management. Call for more information. (800) 833-3765, extension 150.