Approximately 627,000 new businesses are set up annually, but only 25% make it to their 15th year, according to data from the Small Business Association. For a new business to survive and thrive, prudent financial management is mandatory. This involves efficient risk management, tracking your cash flow and, more importantly, monitoring its uses. In order to manage business finances prudently, you will need to work closely with financial institutions such as banks and credit unions. These institutions are usually helpful in making deposits and payments, as well as providing loans for expansion. Startups, therefore, need to be equipped with basic banking tips.
Have Different Personal And Business Accounts
New business owners tend to be tempted to use their personal bank account as their business account. This may look convenient at face value, but it actually leads to unwarranted extra costs. Given that banks charge different fees for personal and business accounts, using personal accounts leads to high monthly costs and transaction fees, an unhealthy scenario for a new business which should be minimizing its expenses. Selecting a separate, convenient small business credit card from a trustworthy financial institution ensures easy tracking of expenses. This makes record keeping easy, and also minimizes losses.
Choose A Suitable Financial Institution
It is important for new businesses to make the correct choice of banking institution, as the financial industry is crowded with an array of banking service providers. Choosing one that is suitable for the needs of your business is very important. For a new business, local community banks and credit union are ideal choices. This is because these are the institutions that offer reasonable and affordable terms and better, more personalized relationships. Businesses looking to expand should consider banks best suited for their future expansion plans. Such businesses should choose a bank that has branches in areas they plan to expand to in future. Before settling on a bank, new business owners need to inquire about its reputation. Go for an established bank that is willing to take risks with you by providing reasonable loans and sound financial advice.
Choosing The Correct Type Of Account
When starting out, one is usually cash strapped; therefore banking fees can be an issue. If you find yourself in such a situation, take up an account that doesn’t charge fees, or one that offers a grace period, usually, about a year long, against fee charges. Being free should, however, not be the only consideration, since it may not be truly free when other costs related to deposit, withdrawal and transfers are factored in. As a new business, it is therefore important to determine the purpose of the account, expected turnover and expenses, so as to choose an account with expenses that will have the least effect on your cash flow.
Having a good banking partner is the first step in the long journey of growing a successful business venture. Maintaining a strong personal relationship with your banker is an invaluable additional tip. As a startup, find a suitable banking partner for credit support and sound financial advice to guarantee growth.