Climb above the Routine
LIke most businesses, you have a primary operating checking account at a Bank. But have you considered having a second account? There are many uses to having a secondary business checking account.
First, and foremost, consider that all vendors or consultants you use and pay by check have everything they need to attempt fraud on your account. Your check has your bank routing number and bank account on it. In today’s savvy fraud world, that is all many criminals need to try and hack your account. If you keep all your money and run all your transactions through only one account, the risk is high in this scenario should your account be hacked.
I have also seen clients use a second account to pay new vendors. Using it to pay new vendors allows you to become comfortable with doing business with them. And, once a pattern is established and your trust in their business has been achieved, you can revert back to using your primary account. This action again protects the bulk of your funds as they would not have access to the primary operating bank account during your vendor/consultant onboarding process.
Another reason for multiple bank accounts for your company may be to isolate funds for various projects so there is no co-mingling. This is important if you are a Prime Contractor on a job; mixing specific job funds with your firm’s operating account can be a dangerous situation. Read your contract with the owner closely, they may demand a new account be opened just for the project funds anyway. Even if your contract does not require a stand along checking account, it is good practice if specific funds are coming in for specific payments. It will be easier to audit, easier to review, and will provide you with peace of mind that you are not mixing funds that really should be independently managed.
If you find yourself in the exciting position of embarking upon the purchase of a building or the construction of a new building for your business, you will definitely want to establish a project account. If there is financing for the project, often it is easier to track all the incoming sources and outgoing uses within a single account, not mired in the everyday operational transactions of your business.
I have also seen many companies establish a new checking account for accepting deposits on credit card or PayPal type sales. If the bulk of your business is through credit card this could be tricky as you want to make sure you have enough funds in your operating account at all times to pay overhead or unexpected expenses. Transferring monies from the credit card acceptance account to the operating account could take more of your time that should be spent on the next project or sale. So, make sure this really does make sense, not only from a bookkeeping or recording aspect, but from a resource allocation standpoint. Do not let it take away your efficiency.
Likely, the most common reason for a secondary business checking account is to establish a payroll account. Firms will often transfer money each pay period and have the funds be issued from a non-operating account. This allows your employees to remain one step away from having your primary account information. It also makes it easier for bookkeeping if you have a payroll service that is debiting the account and issuing the checks on your behalf. Once you begin adding employees to your business, this is certainly a must to evaluate.
Having multiple checking accounts can be beneficial to organizing your business inflow and outflow of cash. If you are with a community or even regional bank, often that second account can be free if you do not exceed certain volumes or transactions or if you maintain a certain amount in all your accounts. Be sure to actively manage this aspect and if your business is growing, it may be a good time to evaluate your need for multiple accounts and seek out a bank whose options are fee friendly to this type of business cash management.
At times, we all need to take a step back or climb above our daily routines like Cisco and Lafayette in today’s Blog Photo. Get a fresh perspective and make sure you are fueling the engine that is moving your business cash management practices forward.
Be well.
