• Mon. Mar 4th, 2024

Small Business Banking Essentials: Tips for Entrepreneurs

BySarah Writer

Feb 7, 2024

Starting and running a small business is no easy feat. Between managing employees, tracking finances, marketing your products/services, and actually selling your offerings, it’s easy to become overwhelmed. One of the most important things for a small business owner to get right from the start is setting up the proper banking and financial management systems. Your business bank accounts and financial management strategy will be the foundation on which your company is built.

In this blog post, we’ll cover some banking and financial tips tailored specifically for entrepreneurs and small business owners. Follow this small business banking advice to set your company up for success.

Key Takeaways

• Choose the right bank for your specific small business needs – local vs national, fees, interest rates, access, and services.

• Open the necessary accounts like checking, savings, credit cards, merchant services, CDs, and lines of credit.

• Automate payments, cash transfers, billing, invoicing, payroll, and other transactions for efficiency.

• Implement good financial habits like reviewing statements, paying bills on time, tracking expenses, and consulting an accountant.

• Finance smartly by understanding your numbers, raising only necessary startup capital, leveraging credit responsibly, and avoiding excessive debt.

• Use your bank’s technology for convenience, oversight, and automation of tasks.

• Protect accounts through strong passwords, two-factor authentication, vigilance against fraud, and good security practices.

• Select the right business credit cards for smoothing out cash flow, tracking spending, and earning rewards.

• Mastering small business banking and financial management is key to growth and success.

Choose the Right Bank for Your Small Business

Not all banks are created equal when it comes to serving small business clients. The bank you use for your personal checking account may not be the best fit for your business finances. Here are some factors to consider when choosing a bank for your small business:

Local bank vs. national bank

Local and community banks are often able to provide more personalized service and more flexible lending options. Meanwhile, large national banks may offer more advanced digital services and a wider ATM network.

Business-specific products

Look for a bank that offers small business checking accounts, small business loans, merchant services, payroll services, and other products targeted to entrepreneurs.


Compare monthly maintenance fees, transaction fees, wire transfer fees, and fees for services like cash deposits and withdrawals. Try to minimize fees.

Interest rates

For savings accounts or certificates of deposit, choose a bank that offers competitive interest rates.

Access to branches and ATMs

Having access to physical branches and ATMs can be helpful for making deposits, seeking advice, and managing cash flow.

Digital banking services

Many small business owners manage their banking entirely through online and mobile apps. Make sure your bank has robust digital tools.

Personalized service

Find a bank that assigns you an account manager or representative to handle your unique business needs.

When comparing bank options, you may want to consult reviews and ratings on sites like NerdWallet. Schedule appointments with a few local bank branches to meet with representatives and discuss your business’ needs.

Set Up the Right Small Business Accounts

Once you choose a bank, it’s time to open accounts designed for business use. Here are some of the most essential small business bank accounts:

Business checking account

This will be the workhorse account you use for everyday revenue and expenses. Aim for an account with no monthly fees and unlimited transactions.

Business savings account

Use this account to build up an emergency fund, save for taxes, and accumulate cash for periodic expenses. The account should earn interest.

Merchant services account

If you plan to accept credit card payments from customers, open a merchant services account. The bank will provide credit card processing capabilities.

Company credit card

Opening a credit card in your business name is useful for company purchases and expenses. Make sure to pay it off in full each month.

Certificate of deposit

CDs let you earn higher interest rates on unused cash reserves. The money is inaccessible for a set period of time.

Business line of credit

Pre-approved access to a revolving credit line can help you handle cash flow issues. The bank offers better rates than credit cards.

Automate Payments & Cash Management

Running a business involves constant cash inflows and outflows. To stay financially organized, automate as many transactions as possible. Here are some tools that can help:

Payroll service

Outsource payroll to automatically pay employees and handle taxes. Services like Gusto, OnPay, and QuickBooks Payroll make payroll simple.

Online billing

Sign up for online billing accounts with recurring expenses like web hosting, software subscriptions, utilities, and other services. Automating these bills ensures they get paid on time.

Client invoicing

Use accounting software like QuickBooks or FreshBooks to send automated invoices to customers and accept online payments.

Online bank transfers

Set up automatic transfers to move funds between business accounts or to pay business credit cards and loans.

Cash flow analysis

Use accounting reports and forecasts to predict future cash flow needs. Plan income and expenses weeks or months in advance.

Expense tracking

Require employees to submit receipts and track all company expenses. Keeping close tabs on costs helps with cash management.

Mobile banking apps

Check balances, transfer funds, deposit checks, and manage your accounts from your smartphone. Mobile convenience keeps you connected.

Adopt Good Financial Management Habits

In addition to the right banking tools and accounts, you’ll need to implement ongoing habits and practices to manage the business’s finances responsibly. Here are some tips:

Review income and expenses weekly – Download reports from accounting software and bank accounts to monitor cash flow continuously.

Reconcile accounts monthly – Compare bank statements to accounting software figures to catch any discrepancies.

Pay bills when due – Don’t delay paying vendors, suppliers, or service providers. Paying late can hurt your credit.

Limit use of business credit cards – Use cards for true business expenses only and avoid carrying balances.

Review payroll taxes quarterly – Screen payroll summaries to confirm all payroll taxes are accounted for and paid.

Check for unused subscriptions – Cancel software, services, or equipment that are no longer needed to avoid unnecessary charges.

Pay owner’s salary consistently – Take a regular salary instead of sporadic owner’s draws. Document the salary as an expense.

Run financial reports monthly – Schedule time each month to review profit and loss statements and balance sheets.

Consult your accountant – Hire an accountant to advise you on taxes, regulatory compliance, financial planning, and record keeping.

Adopting healthy financial habits positions your company for stability and success in both the short and long term. Be diligent and consistent with your money management.

Finance Your Business Smartly

Beyond day-to-day banking and money management, entrepreneurs need to make strategic financing decisions that provide enough capital to grow, without accruing dangerous debt levels. Here are smart tips for financing your business:

Know your numbers

Understand your current finances and expected future numbers. This allows you to determine how much capital you need.

Raise startup capital

Consider sources like business loans from banks, crowdfunding, angel investors, friends/family, or your own savings.

Accept credit card payments

Taking credit cards from customers improves cash flow compared to invoices. Just be sure to balance against processing fees.

Use business credit cards responsibly

Cards can cover expenses during lean cash periods. Again, pay off balances each month.

Consider equipment leasing

Instead of large equipment purchases, lease necessary equipment while preserving capital.

Leverage accounts receivable

If waiting for invoice payments, get a cash advance using unpaid invoices as collateral.

Only take on necessary debt

New loans and credit to scale your business are fine. But excessive debt can bury a company.

Build emergency reserves

Steadily accumulate several months’ worth of operating expenses in your savings account.

Set growth goals

Plan your growth objectives before seeking capital. And raise only what you need to meet targets.

Avoid predatory lenders

Stay away from merchants offering exorbitant rates or unreasonable repayment terms.

Managing business finances boils down to taking in more than you spend each month and year. But growth also requires capital. Use these tips to strategically fund your business without risking its financial health.

Leverage Business Banking Technology

Today’s business banking landscape is high-tech. Online and mobile tools provide unprecedented convenience, automation, and oversight of your accounts. Be sure to take advantage of your bank’s tech offerings:

Online dashboards – Gain a comprehensive, visual snapshot of your accounts and transactions in one place.

Paperless statements – Opt for digital monthly statements instead of mailed paper statements.

Secure online banking – Conduct transactions and manage your accounts anytime via your bank’s website.

Mobile banking apps – Deposit checks, transfer funds, and monitor activity on your smartphone.

Account alerts – Set up email or text alerts for low balances, large transactions, or other triggers.

Bill pay – Schedule one-time and recurring online bill payments to vendors.

Accounting integrations – Sync your bank accounts with QuickBooks or other accounting platforms.

Remote deposit – Photograph and submit checks for deposit directly from your phone.

Expense reporting – Link credit cards and automatically capture expenses for easier tracking.

Cash flow analysis – Let your bank track income and outflows and project future cash positions.

Fraud monitoring – Banks use algorithms to detect suspicious activity and notify you of potential fraud.

Merchant services – Accept credit card payments seamlessly through bank-provided point-of-sale systems.

Payroll integrations – Connect payroll systems to your bank accounts for direct deposits and tax payments.

Take time to understand all the technology-enabled services your bank provides. They can save you time, organize your finances, prevent fraud, and fuel growth.

Protect Your Business with Sound Security

While banking technology enables convenience and productivity, it can also make your accounts vulnerable if proper security precautions are not followed. Be vigilant about protecting your business finances: Here is the continuation of the blog post:

Use strong passwords – Don’t use simple passwords or reuse them across multiple sites. Employ randomly generated long passwords.

Enable two-factor authentication – Add an extra login step like a code from your phone to enhance security.

Keep software updated – Maintain up-to-date antivirus software and update other programs promptly.

Beware phishing scams – Watch for suspicious emails requesting account information. Call your bank instead of clicking links.

Limit administrator access – Only owners and critical staff should have full access to all financial accounts.

Monitor accounts daily – Review transactions and account balances daily to catch unauthorized activity.

Vet remote access – Allow employees remote login to accounting systems only via secure networks and devices.

Shred documents – Discard any paper records containing sensitive financial information securely.

Back up data – Keep an extra copy of financial records and data via cloud or external sources.

Read privacy policies – Understand how your bank and related services use your data and protect your information.

Consider insurance – Obtain cybersecurity insurance to cover losses in the event of a data breach or attack.

Use secure connections – Only access bank accounts and financial platforms on private and trusted WI-FI networks.

Ongoing vigilance is required to keep your business finances and data secure. Make smart security practices part of your regular financial management routine.

Choose the Right Credit Cards

Business credit cards warrant their own discussion. Cards can smooth out cash flow, finance purchases and simplify accounting. Be selective about which card(s) you apply for. Look for features like:

0% introductory APR – Look for a 12 to 18-month period of no interest on purchases.

Rewards on categories – Cards that pay higher rewards for things like office supplies, advertising, or utilities can save money.

No annual fees – Choose a card with no yearly cost to hold it.

Employee cards – Some cards allow you to issue cards tied to your account to responsible employees.

Purchasing power – A higher credit limit provides more purchasing flexibility.

Fraud protection – Make sure your card offers $0 liability in case of unauthorized charges.

Virtual cards – Generate one-time use card numbers for online subscriptions and bills.

Integration – See expenses flow directly into accounting software and financial dashboards.

Consolidated billing – Managing fewer monthly statements is easier.

Vendor tracking – Use different cards for specific vendors to simplify expense categorization.

Credit limits – Don’t open cards with higher limits than you expect to utilize monthly.

Apply for 1-3 cards tailored to your spending profile and habits. Use them strategically and pay off balances in full.

The Bottom Line

Mastering small business banking is key to controlling your company’s financial trajectory. Follow the tips outlined in this article to set up the optimal banking relationship and financial management strategy.

Choose the right bank accounts and leverage available business services. Automate transactions, adopt money management best practices, fund operations strategically, and harness banking technology. Safeguard your finances through rigorous security policies. Pick credit cards that meet your purchasing needs and help track expenses.

With these small business banking essentials, you can run a financially organized, well-capitalized business positioned for growth and success.

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