Savings & Banking

As a small business owner, every decision a provider makes affects the bottom line. Choosing the right bank for his/her business accounts is no exception. Here are a few key questions to ask before selecting a new bank.

Personal vs. Business Accounts – What is the difference?

As a new business owner, the distinction between these two types of accounts can be confusing.

• Transaction caps – Business checking accounts may place limits on the number of monthly transactions and total cash deposits, whereas personal accounts generally do not.
• Additional fees – Accounts with transaction limits will also incorporate fees for exceeding them.

These factors mean that small business owners have a lot to lose – or gain – by selecting a particular account. Ideally, a new business checking account should closely fit your needs and banking habits to reduce the impact of fees.

Transaction fees, cash deposit limits and other charges can add up in a major way and may be tough to predict.  When choosing a bank, keep in mind:

• How does the bank accommodate a small business  during slow months?
• During busy months, will the owner be able to afford overage fees?
• Does the small business deal more with cash, checks, or credit cards?
• Does the small business operate in a district that may need a courier service for larger deposits?

How will the small business owner make most transactions?

Just as with personal bank accounts, there are a variety of services and tech solutions to help make banking simpler for both parties.

Online banking (and more recently mobile banking) has exploded in popularity over the past few years. These two services are highly important when establishing a new banking relationship since they will allow a business owner to keep track of his/her business account balances and transactions at all times, and from any location.

An even more valuable tool for business owners is the ability to make deposits from home or office. Though it is less widely available, many banks and credit unions offer remote check deposits via a mobile app or computer scanner. If a business deals frequently in paper checks, this type of service could cut out countless trips to the bank.  On a similar note, online Bill Pay services help to reduce paper waste and automate recurring payments.

To be clear, these features aren’t necessarily essential for all business owners. If a company highly values interpersonal customer service, then a smaller bank with nearby branches is the option – mobile app or not.  However, if a business owner travels a lot for business, or runs a tech-heavy operation, the convenience of automatic deposits and transactions on the go will boost the utility of such self-service options.

Will a small business owner need other business services?

Banks and credit unions may offer additional services to cater to business owners. Through key partnerships, some institutions offer payroll and employee benefit services, merchant card processing solutions, and even tax preparation assistance at a discount when linked to a business bank account. Though this shouldn’t stop a business owner from comparison-shopping for the best services at the lowest cost, partnering with his/her bank may provide a smoother interaction.

What are the business’s borrowing needs?

Small business owners will find it easier to secure financing from a local bank, typically at a lower interest rate than national chains. Smaller banks and credit unions want the business and will show flexibility if there is a good working relationship.

Other business resources

Many resources like the U.S. Small Business Administration’s website (SBA.gov) help small business owners connect with “other small business owners and get advice on starting, growing and managing your business.” The website offers blogs and posts concerned with everything from offering advice on starting a business, to loans and grants, filing and paying taxes, and even advertising.  Having knowledge of the business and bouncing ideas off others is a great way to develop a strong business plan and identify which financial direction is best.

Gower, J. (2013, August 9). “How Do I Find the Right Bank for My Small Business?” – NerdWallet. Retrieved November 20, 2015, from http://www.nerdwallet.com/blog/banking/choose-a-bank-for-your-small-business/

Resource and links:

Choosing the Right Bank for Your Small Business

Opening a business bank account online can be an easy and painless process when all the necessary documentation is in place.

First, it is important to realize there are several factors that can prohibit one from opening a business bank account on the Internet.

For example, if a company provides money services, including check cashing, issuing money orders, issuing store value cards, exchanging currency, or wiring funds in exchange for a fee, banks will not allow the opening of an online account. A business owner will need to go to the branch personally to open an account.

In addition, if a business falls into one of the following industries, then the owner will need to open an account in person rather than online

1. Telemarketing
2. Precious metal dealers
3. Gambling
4. Government entities

So, what type of documentation is required to open a business bank account online? Depending on the structure of the business, the following documents will be required to open an account online.

Sole Proprietorship

• Social Security Number or Business Tax Identification Number
• Business License showing both business and owner’s name, or
• Business name filing document, such as a Fictitious Name Certificate or Certificate of Trade Name, showing both business and owner’s name

General Partnership

• Business Tax Identification Number
• Partnership Agreement showing business name and name of partners, and
• Business name filing document, such as Fictitious Name Certificate or Certificate of Trade Name, showing business name and name of partners

Limited Partnership

• Business Tax Identification Number
• Limited Partnership Agreement showing business name and name of partners, and
• Business organizing document filed with and certified by state official, such as Certificate of Limited Partnership, showing business name and name of partners

Limited Liability Partnership

• Business Tax Identification Number
• Limited Liability Partnership Agreement showing business name and name of partners, and
• Business organizing document filed with and certified by state official, such as Certificate of Limited Liability Partnership, showing business name and name of partners

Corporation

• Business Tax Identification Number
• Articles of Incorporation or Certificate of Incorporation
• Corporate Resolution identifying authorized signers if officer names are not listed on Articles of Incorporation or Certificate of Incorporation

Corporation (Publicly Traded)

• Business Tax Identification Number
• Articles of Incorporation or Certificate of Incorporation
• Corporate Resolution identifying authorized signers if officer names are not listed on Articles of Incorporation or Certificate of Incorporation

Professional Corporation

• Business Tax Identification Number
• Articles of Incorporation or Certificate of Incorporation
• Corporate Resolution identifying authorized signers if officer names are not listed on Articles of Incorporation or Certificate of Incorporation

Limited Liability Company

• Business Tax Identification Number
• Articles of Organization or Certificate of Formation
• Corporate Resolution identifying authorized signers if officer names are not listed on Articles of Organization or Certificate of Formation

Unincorporated Association

• Business Tax Identification Number
• Organizing document, such as Articles of Association (if available)

A business owner will be prompted to select the type of bank account preferred. Some online banks offer a variety of options, from business economy checking to full analysis business checking.

If a business owner is given the opportunity, he/she should select the business debit card option and review all the additional services that can be added to the account.

Once a business bank account is successfully established, the next step is to establish a favorable bank rating for the company.

Carbajo, M. (2012, March 21). “How to Open a Small Business Bank Account Online” | The U.S. Small Business Administration | SBA.gov. Retrieved November 20, 2015, from https://www.sba.gov/blogs/how-open-small-business-bank-account-online

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Bank statements can help business owners track finances, catch mistakes and understand spending habits. It’s a good idea to review them on a regular basis.

Bank statements usually have seven parts:

1. The account balance from the last statement date
2. A list of deposits within the last statement cycle
3. A list of withdrawals within the last statement cycle
4. Any interest the account earned
5. Any fees charged by the bank
6. The new account balance
7. Instructions for reconciling an account

A financial institution usually mails a statement once a month or quarter, depending on its banking cycle. If a business owner has signed up for online or mobile banking, he/she might also be able to access the statement from a computer or smartphone. Some free checking accounts only offer online access to statements.

If an account is viewed online, it’s still smart to print out copies in order to have them accessible when away from a computer or phone.

 

Reconcile the account

It is important to regularly review bank statements to ensure everything is accurate. “Reconciling your account” — or matching up a business owner’s record of deposits, withdrawals, interest and fees with the information on his/her bank statement — can help him/her catch any mistakes or even fraud. It can also help avoid overdraft fees if the bank statement shows less money than what is believed to be available.

When looking at bank records, a business owner should remember to pay attention to the statement’s end date, since transactions made after that date will appear on the next statement.

Correct mistakes

When an account is reconciled, a business owner might see charges on the bank statement he/she may not remember making. Or, he/she might see transaction amounts that may not be accurate. For example, he/she may remember paying $24 at a restaurant but it shows up on the bank statement as $42.

It’s worth taking a few minutes to find the reason for the discrepancy. It may be that a purchase was made and was forgotten, or perhaps the wrong purchase amount was recorded in a software app or check records.

If there is a mistake, the business owner will want to report it to his/her bank or credit union. He/she will usually have 60 days from the statement date to dispute any errors.

Keep records

After reviewing a paper statement, it should be filed in a safe place and kept for at least a year. The statement will need to be referred to when it’s time to file a tax return. In adddition, if a business owner plans to refinance or buy a home in the near future, potential lenders might want to see several bank statements when he/she applies for a loan. Bank statements are also accessible online as needed.

Bank statements are a great tool to help business owners track their money and stay on the same page as their bank or credit union.

Resource and links:

Burnette, M. (2015, October 30). What Is a Bank Statement? – NerdWallet.

The range of options for consumers seeking financial services has broadened significantly in recent years, with online-only banks, robo-advisers and crowd funding taking most of the headlines.

But one of the oldest and most basic features of the landscape of banking institutions is often poorly understood, namely, the difference between credit unions and banks.

At-a-glance comparison

While the two kinds of institutions provide many similar consumer products and services, their delivery of products and services can differ significantly.

Here’s how credit unions and banks compare across a variety of criteria that may be important to the small business owner:

Rates and Fees	Winner: credit unions
On average, credit unions offer lower loan rates, higher interest rates, and lower fees than banks do. Some online banks do better in these areas than either traditional banks or credit unions.
Customer Service	Winner: credit unions
Credit unions tend to beat out the big banks, at least, on customer service. Between 2010 and 2014, credit unions averaged 9.7% better than banks, as measured by the American Customer Service Index. In some cases, though, banks may have better options, such as Twitter support and extended call-center hours.
Physical Locations	Winner: too close to call
Because many credit unions have small territories, it’s easier to find banks with huge numbers of branches and ATMs across the U.S. However, many credit unions have compensated for this disadvantage by joining the CO-OP network of credit unions, which allows their members to access about 30,000 ATMs and 5,000 branches, in many cases with no fees.
Technology	Winner: banks
Credit unions have a reputation for lagging in consumer technology, so those looking to use early or best-in-class versions of options such as online banking, mobile banking apps, Apple Pay and remote check deposit may be happier with banks.
International Travel	Winner: banks
The very biggest banks likely have more of their own (fee-free) ATMs abroad, while credit unions tend to have lower fees for international ATMs. A few online-only banks have no fees at all for international ATMs or debit transactions.
Safety of Funds	Winner: everybody
Both kinds of institutions are usually federally insured — banks by the FDIC and credit unions by the NCUA. The details of the insurance are functionally identical.
Community Impact	Winner: too close to call
Credit unions often more directly affect their members’ local communities, though some banks have large and respectable philanthropic wings.

Comparing any two institutions may, of course, reveal exceptions to these general patterns.

The biggest difference: What happens to profits

What is a credit union, anyway? Although both kinds of financial institutions provide similar services to consumers, credit unions are not-for-profits, while banks are for-profit organizations.

That single difference is the foundation for most of the others. When a company exists primarily to generate profit, its core operations are organized around maximizing that profit for a return to its ownership.

A credit union, though, exists in principle to serve a community of people tied by a “bond of association,” which may be based on geographical region, employer, membership to another association, faith or other factors.

Credit unions serve that community by providing financial services products for its members with the most favorable terms they can afford to offer. Instead of offering accounts to customers and large dividends to a small group of owners, as banks do, credit unions offer small dividends — and discounted loan rates reduced fees and other benefits — to a large group of members. Credit union members are, in that sense, both customers and owners.

Making the choice

Now that there is an understanding of the major differences between banks and credit unions, you are ready to look for the best option. Here’s one path you can take:

• Identify your values: What matters most in an institution? Great rates? A modern technological experience? Top-notch customer service? Make a prioritized list of what you’re looking for.
• Identify top contenders: You may already have a credit union in mind; if not, you might consider some of NerdWallet’s favorites. There are also objective recommendations for banks of all kinds, including big  national banks and online-only institutions. Finally, compare checking and savings accounts for yourself.
• Narrow the list: Which banks meet your top criteria? Among these, do some perform better in certain areas that could be of value? What are the negatives?

However you choose to find a financial institution, the more you know the better off you’ll be.

Goldstein, D. (2015, August 15). Credit Unions vs. Banks.

Julieta Garibay opened her first bank account at age 20. At the time, she was working as a waitress and saving money for college.

She was also an undocumented immigrant, having moved from Mexico to Austin, Texas, with her mother and sister when she was 12 years old.

For several years, Garibay’s immigration status kept her from opening a bank account. Instead, she kept the money she earned — paid in cash — in a paper bag, which she stashed in the fridge or under her bed.

“I was scared that if I gave my information, then the government would have it and I could be deported,” said Garibay, now 35 and the deputy advocacy director at United We Dream, an immigrant youth advocacy group.

But with the prospect of college tuition on the horizon, her paper bag no longer made sense. So she opened an account with Bank of America, where her mother — also undocumented at the time — already had an account.

Why open a bank account?

Save money: Garibay’s decision to open a bank account was motivated by her going off to college. She was moving to Dallas and would need to rent an apartment, get a phone and pay bills. These tasks are easier, and often cheaper, to do with a bank account.

That’s because, without a financial history, phone companies, apartments, and other services can require substantial deposits. Bill payment and check cashing services, and some prepaid debit cards, may charge higher fees as well.

Personal safety: “A lot of the immigrant community gets paid in cash and walks around with a week’s salary in cash. According to Mayra Aldás-Deckert, special projects associate at the New York Immigration Coalition that’s dangerous.

If money is kept at home in a paper bag, as Garibay did, a weeks’ or months’ worth of savings could be lost to theft. And news stories chronicle a pattern of robberies targeting day laborers and other immigrants across the country; with ample cash in their pocket, these workers are viewed as “walking ATMs.”

A bank account is a safe place to store money. Even in the unlikely event a bank is robbed, the money is insured and would be replaced. And carrying less cash means not being vulnerable to thieves on the street.

Establish history: A bank account also helps undocumented immigrants build a financial footprint. In most cases, a bank account is required to open a credit card, buy a home or borrow funds to start a business — all actions that help establish a credit history. In some states individuals can also open a college savings plan with tax benefits, known as a 529 plan, provided there is an Individual Taxpayer Identification Number (ITIN).

This footprint does more than all that, though. It also creates a paper trail that can help if individuals apply for Deferred Action for Childhood Arrivals (DACA) or another permanent or temporary immigration status change.

Garibay, who became a legal resident in January 2014, stopped at FedEx on the way to her immigration interview to print copies of her bank statements and telephone bills, just in case she needed to further validate her time in the U.S.

“It’s a good way to provide proof that you’ve been living in the U.S., to provide proof of where you have been,” she said.

What you need

Identification number: Many banks and credit unions allow customers to open an account with an Individual Taxpayer Identification Number (ITIN). A Social Security Number is not required.

“If you don’t have a Social Security number, you should absolutely get an ITIN,” said Marisabel Torres, a senior policy analyst atNational Council of La Raza who works on the organization’s Wealth-Building Policy Project. “If you’re a working person, you want to have a record that you’re paying taxes and you want a history of being in the country.”

The IRS issues ITIN numbers to noncitizens who are working in the U.S., but are not eligible for a Social Security number. To get one, fill out the required form (available in English and Spanish) and submit proof of identity, such as a passport or driver’s license, along with a completed federal tax return.

An application can also be mailed, submitted to an IRS walk-in office or have be processed by an “acceptance agent.” These agents typically include colleges, accounting firms and financial institutions, such as banks or credit unions.

Proof of identity and address: Banks and credit unions need to verify a person’s identity before opening a account. To do so, they typically require one of following documents:

• Unexpired passport
• Government-issued driver’s license (including foreign licenses)
• Consular ID card
• Birth certificate

Applicants living in New York City, San Francisco or other cities that issue municipal IDs can often use those as proof of identity.

Banks and credit unions often require a street address to open an account. A utility bill, lease or current driver’s license or municipal ID can satisfy this requirement.

Is your savings account perpetually stuck in the single digits? While it might seem inevitable now, there is no reason why your account has to always be on low. Whether you are dreaming of a new car or simply want a healthy emergency fund, here are seven easy ways to build up your stash of cash.

Pay yourself first

The best way to increase the balance in a savings account is to prioritize saving money. This means shifting views about savings from something done at the end of the month after the bills are paid, to one of the first bills to be paid.

Savings Accounts

Make a point to deposit money into a savings account every pay period. Even better, if an employer allows you to direct deposit to more than one account, arrange for 10 percent of your income to go into an online savings account or another high-yield account. If you think your budget is too tight to set aside that much, remember that at most institutions, money can easily be transferred from savings back to checking accounts. However, once that money is in savings, you might realize how little you really need it.

Use cash and save your pennies

A cash-only spending system can be beneficial for a variety of reasons. Some studies indicate consumers spend less with cash, and withdrawing a set amount of money for groceries, gas and discretionary spending can make it easier to hold to a budget. It’s usually much easier to see how much cash is left in hand than to try to do fuzzy checking account math in your head.

Combine your cash system with a good old-fashioned coin jar to give your savings an added kick. Put your coins and dollar bills in the jar each evening. Then, count it at the end of each month and deposit it into your savings account and voila! Painless saving!

Save, don’t spend, ‘found’ money

Everyone “finds” money sometimes. It could be literally found in an old coat or the couch cushions, or it could come in the form of a rebate, refund or even that check Aunt Millie sends each year for your birthday.

But rather than sticking that cash in your wallet and letting mocha lattes and vending machines erode it away, store it in your savings account and earmark it for a higher purpose, like that vacation you’ve been promising yourself the last three years.

Direct deposit your tax refund

Along those same lines, put away that check from Uncle Sam you may receive each year. Fortunately, the government offers direct deposit, making it easy to route that money right into your savings account. Because you’ll never see it in your checking account balance, you’ll be less tempted to use it on, say, a treadmill that you’ll use twice.

Sell your clutter

Maybe it’s too late and you’ve already bought the treadmill. Don’t despair. Unloading all the useless items from your house can lighten your clutter and fatten your wallet. Excess clothes can go to a consignment shop, DVDs hiding in the dark corners of the entertainment center can find new homes on half.com, and large items – yeah, that treadmill – can be sold on Craigslist. Then take all that newfound cash to your bank and watch your savings account interest grow.

Roll your interest

Whenever there is the opportunity, roll any interest you earn back into your savings. This is particularly true with CDs and other high-yield savings accounts. You make think of CD interest as income to be spent once the CD matures, but it is better to instead lump it into that “found” category to be saved. Keeping it invested will allow you to reap the sweet rewards of compound interest.

Reduce spending

Yes, it seems obvious. But spending less really is a great way to free up money for savings. You may think your expenses are fixed, but there is probably plenty of room to cut costs. Consider a cheaper cable package, find a checking account with fewer fees, clip coupons, compare insurance rates, ride the bus or even refinance your mortgage and auto loans. Budget trimming is as much an art as it is a science, and there is virtually no limit to the possibilities for shaving monthly expenses.

If you view it as a priority, saving money doesn’t have to be painful. And once you create a saving plan that you can follow, you may never find your balance lingering in the single digits again

Resource and links:

LaPonsie, M. (2011, November 30). 7 ways to beef up your savings account. Savings Account.