Small Business Banking Basics: Why the Partner You Choose Matters

Choosing the right banking partner is crucial for small businesses that rely on the financial flexibility of having quick and easy access to various accounts.

Your choice of where you open your business’s accounts will greatly affect how quickly you can react to changes in the market and make your day-to-day financial operations run more quickly and efficiently.

It’s important for you to work with a financial partner who can help accelerate your business’s growth and guide you toward a more profitable future.

In this article, we’ll discuss a few common business banking services that you may find helpful in running and growing your business.

Small business banking services for you to take advantage of

Smart business owners will often structure their organizations in a way that makes processing financial transactions as fast and easy as possible.

After all, your customers don’t want to engage with a business that takes weeks to process payments, and a lack of organization on the financial side of things can hurt your recordkeeping and cash flow.

When customers expect speed and ease of use from your business, it’s critical that you have the infrastructure in place to meet their needs.

To solve this issue, most businesses partner with banks that can provide a variety of services to streamline and automate certain financial tasks.

From business credit cards to savings and checking accounts specifically tailored to meet your business’s needs, it’s important for you to find a banking partner that can help streamline your processes and improve the experience for your administrative team, employees and customers.

Business checking

The groundwork for any small business banking solution is a business checking account.

Opening a business checking account can help you automate bookkeeping and establish the financial groundwork for future growth and automation.

For legal reasons, it’s vitally important that you open a separate checking account for your business to ensure you retain your limited financial liability.

In fact, mingling your personal and business funds is one of the worst possible mistakes you can make as a small business owner, so it’s something you’ll want to avoid at all costs.

Business checking accounts also make it easier for you to prepare your company’s taxes at the end of the year.

For these reasons and more, opening a business checking account is vital for running your small business effectively and efficiently.

When researching providers for your business checking account, you should take the time to review the bank’s entire offering, not just business checking accounts.

Often, the bank you choose for your business checking account is the one you’ll use for your other business banking needs, so it’s important for you to find a partner that meets all your business’s financial needs first.

Saving and investing

Liquidity is a measure of your business’s ability to convert assets (such as financial accounts or inventory) into cash.

Ensuring your business has healthy liquidity can help it overcome otherwise disastrous financial challenges.

Further, banks and other financial institutions will review your business’s liquidity when making decisions about offering you loans or opening new accounts.

When running your business, you should always try to keep a healthy mix of low-liquidity assets, such as real estate and infrastructure, and high-liquidity assets, such as cash and cash equivalents.

This final point is important because it highlights the purpose of opening a savings account for your business.

For example, it’s wise for new and established businesses alike to keep a reserve of cash in an account where it can grow over time.

This solution can help provide your business with the liquidity it needs to surmount financial challenges and position itself strategically in the market.

Having liquid assets in reserve can help you prove to your banking partner that your business is solvent enough for larger loans and more advanced banking services.

In practice, this will mean saving up a business emergency fund that can cover roughly three to six months of your business’s savings in a cash equivalent account such as a business savings account, a money market account, a certificate of deposit (CD) or some other financial vehicle with high liquidity.

Businesses with more cash on hand may also choose to open separate accounts outside of their emergency fund to pay for unexpected emergencies, save up for large expenses or plan for other long-term financial goals.

Cash management

In the context of banking, the phrase “cash management” generally refers to the process of collecting and managing cash flows in and out of your business.

When it comes to choosing a banking partner, this will often mean finding a bank that can help you manage your business’s various payables and receivables in a way that improves your ability to control cash flow.

On the payables side of the equation, you should look for a partner that can help you set up online bill pay, manage your taxes, resolve your payables through credit card transactions, manage wire transfers, conduct payroll and generally help you move cash from your accounts to external sources, such as creditors and employees.

For your receivables, you’ll need to partner with a bank that can help you process ACH payments, provide access to remote deposit services and otherwise help you with any number of the various merchant services your business may need.

Put simply, your banking partner should provide you with the resources you’ll need to effectively manage how money goes into and comes out of your various checking and savings accounts.

Credit, lending and commercial financing

Credit is the primary mechanism through which you can accelerate your business’s growth.

When properly managed, access to capital through credit can help you expand your operations, improve cash flow, hire additional staff and better manage your business’s finances.

By working with your banking partner, you can gain access to capital through business credit cards, business loans and lines of credit, among other lending options.

For the daily operation of your business, credit can help you gain access to the cash reserves you need to react to changes more fluidly in your market.

For example, if you run a business that produces goods using equipment, it can be difficult to save enough money to buy new equipment outright.

By purchasing these assets using credit, you can spread the total cost of the equipment over several months or years, flattening the hit on your cash flow and enabling you to increase your revenue through access to the new equipment today.

Since credit plays such a large role in the operation of any modern business, it’s important for you to partner with a trusted bank that can help guide you through the different options you have for accelerating growth.

Specialized services and accounts

In addition to conventional business checking and savings accounts, your banking partner should also offer a variety of additional, specialized services to meet your business’s needs.

For example, if your business is a tax-exempt entity (such as a nonprofit), your bank may be able to offer you a specialized nonprofit or public funds checking account to help you manage funds.

If you’re a lawyer, real estate broker or other professional, you may want to review your bank’s Interest on Lawyers’ Trust Account (IOLTA) and Interest-Bearing Real Estate Trust Account (IBRETA) offerings to ensure they can integrate seamlessly into your workflows.

In the event you’re searching for an employee benefits partner, you may also want to review the various health savings accounts (HSAs), flexible spending accounts (FSAs) and other offerings that you can leverage to improve the employee experience.

While it’s impossible to create a full list of peripheral accounts your banking partner may offer, the key takeaway is that having an open, honest conversation with your banker about your business needs could lead to a solution you may not have considered beforehand.

Remember, your banking partner’s primary goal should be to make it as easy and efficient as possible for you to run your business from a financial perspective. They should be well-equipped with the information you need to precisely target and resolve points of friction in your financial processes.

Find a small business banking partner that can help you grow

Partnering with the right banking partner can help you solve your business’s day-to-day and more complicated financial needs.

The right banking partner can offer you a variety of services to help protect you from financial liability, gain access to additional capital through credit and loans and better manage your cash flow through various account types and services.

Associated Bank offers a variety of business checking and savings accounts—among other services—that can help you keep up with your piece of the Midwest dream.

With roots in our local community and easy online banking, our team is prepared to help you accelerate growth and work toward a more profitable future.

If you have any questions about the ways Associated Bank can help you grow your business, give us a call at 800-236-8866, schedule an appointment online or visit us at any of our Associated Bank locations.