As I mentioned in our last blog, “The need for a CRM”, we are writing a 5-part series on key components you need in your business. This is the second entry and is all about the need for establishing a strong relationship with your bank.
One question we ask our prospective clients is what relationship they have with their bank. Do they even have a business banker? Many times, all they have is a personal checking and savings account at a financial institution.
Following are the reasons you need to establish and develop your relationship with your bank early on in your business venture.
1. Line of credit and credit cards.
Many times, your business will need a line of credit for day to day operations. Having access to a line of credit will help you establish stronger relationships with vendors by being able to pay them faster. It also gives you the ability to purchase equipment needed to grow and tap into the line of credit when business has a slow period.
Another reason to have a relationship with your business banker is favorable interest rates on business credit cards. There will be business travel and other expenses that are better suited to utilizing a credit card vs your business debit card. Working with your banker to secure a business credit card will help you streamline expenses all while growing your business.
2. Cash flow planning
When working closely with your business banker, they are a great resource to discuss how to better plan for increases and decreases in cash flow. Many banks and financial institutions have resources for accounts receivable financing as well as capital leasing options.
3. Insurance Services
More established financial institutions have business insurance services available to you. Some of the insurance services that banks offer are commercial property, business auto, errors and omissions, general liability and workers compensation. When working with your banker, you should ask about these services and how they would benefit your business.
4. Wealth Management
By having a solid relationship with your business banker as your business grows, you will have a partner to manage your money and investments. Part of managing wealth is being able to lower your tax liability. Your business banker can help you by setting up a simple IRA for your staff where your business matches 3%.
5. Multiple Checking Accounts
As a COO, we recommend our clients have multiple checking accounts. One should be for daily operations only and another should be for payroll and payroll taxes. The reason behind this is for security. You do not want to have the routing and account numbers of your operations account available to fraud. Secondly, it makes it simple to transfer money from one account to another to cover payroll, IRA matching and pay payroll taxes each month.
A relationship with a bank may be scary for you for a variety of personal reasons. Trust me, I know that feeling but you need to know that your bank is there to help you with your business. If you don’t have a relationship with a business bank, Your Remote COO has relationships with a few and would be able to point you in the right direction.
Some banks we have business relationships with are:
At Your Remote COO, we bank with Comerica Bank, our banker Patti has been with us for a long time. When we opened our first business account with her, she came to our home to get all the paperwork signed. What I valued most about this was that Patti, as well as the bank, wanted to establish a personable working relationship with us from the beginning.
Let me close by reiterating that you should establish a relationship with your banker right away. If you still need some help to understand the importance of such a relationship, contact us at Your Remote COO. As your COO we will work with your banker so that you can focus on your business.
All the best,