Choosing the Right Account for Your Business Funds

Running a business means keeping track of numerous complex issues simultaneously. Sometimes this can mean that decisions about banking are pushed to one side and accounts are chosen more for convenience than because they offer the best match for a company’s needs.

Choosing the right account for your business funds, however, can be a critical step toward establishing a stable financial footing.

Terms and conditions matter

In today’s challenging economic times, businesses need to make every penny count, which is one reason why a high yield savings account is such a good choice. Be aware of the terms and conditions that such accounts may carry however. In order to earn the advertised high yield, a company may need to maintain a high balance in the account over certain spans of time and limit the number of transactions involving the account. At some institutions, a company may even need to set up additional accounts.

Depending on the nature of your company, you may want to look for a business account at an institution that can provide specific features. For example, some banks and credit unions offer safety deposit boxes at a discount, so that businesses have a secure location to store their most sensitive paperwork and legal documents. Some even offer free payroll processing with certain of their accounts.

Companies should critically evaluate the fees that are attached to a business account, particularly if they are tied to triggering conditions. With some checking accounts, for example, the business must write a certain number of checks each month to avoid a fee. With others, there are a maximum number of checks permitted before a fee is imposed. Overdrawing an account may trigger a cascade of fees, depending on the situation. It is a mistake to assume that any business will always be able to arrange its finances to avoid every one of these fees. Therefore, if the fees seem too high, it is wise to comparison shop for a more cost-effective arrangement.

Regardless of the terms and amenities offered with a business account, one thing companies should always check for is participation in the FDIC (Federal Deposit Insurance Corporation). Almost all banks in the United States participate, but since this is not a legal requirement, some institutions choose to opt out. If you place your money with an FDIC-insured bank, the government will reimburse you, up to a certain limit, for any funds lost should the institution become insolvent. Savings accounts are typically insured up to $250,000 when the institution participates in the FDIC program.

The positive choice for business

While earning interest on idle funds is an important consideration, choosing the right business bank account produces other significant gains for a company. Developing a relationship with a bank that meets your needs today builds goodwill toward the future, when your business may need a line of credit or a loan. Most small business loans originate, not with large institutions, but with the smaller community banks that have come to see, through first-hand experience, that a business account holder is a reliable and responsible customer.

Future success depends on many factors, but a key one is making the right banking decision today.