Making the switch from your current bank to a new bank might seem like a hassle.
There are loans and lines of credit to close, automatic payments and deposits to redirect, and outstanding checks waiting to be cleared. Generally, it can appear as a time drain that pulls business owners away from concentrating on their business’s core functions.
This, however, is not the case.
Harry J. Eaton, assistant vice president and Business Development Officer at Consumers National Bank, says a business’s new bank has people in place whose job it is to ensure a smooth transition.
They’ll help a business owner make sure all scheduled deposits and withdrawals are routed to the appropriate accounts, train staff on new equipment and generally offer peace of mind during what could otherwise be a complicated transition.
Smart Business spoke with Eaton about how businesses can smoothly transition from one bank to another.
What are typical hurdles for business owners transitioning from one bank to another?
One of the main hurdles businesses experience when moving from one bank to another is transitioning their deposit accounts.
To do so requires time and a review of your technology to ensure existing computer equipment is able to handle sophisticated products like remote deposit capture and online banking.
Further, automatic deposits and payments must shift from one bank to another in a coordinated manner.
It’s important not to close the accounts at the old bank until it’s clear that money is no longer moving to or from existing accounts. The overlap is important because a business may have outbound or inbound checks that might not clear for 30 days.
It’s not likely the case, for example, that if the old account is closed there’s no place for automatic deposits to go. It just becomes a hassle to figure out where that transfer went wrong and it delays the business’s ability to use that money until everything is sorted out.
Once an appropriate amount of time has been given to ensure all deposits and withdrawals are going through the new account, it’s safe to close the old account.
What impact can a poor transition have on the business moving its accounts and that business’s clients and vendors?
There are several.
More and more businesses are using automatic deposits that feed checking accounts with customer deposits or distribute payroll to employees faster than can be accomplished with traditional methods. An improper transition can be upsetting to businesses.
If the flow of money from customers and to employees is disrupted, it can cause serious issues.
Banks that understand the potential pitfalls of an uncoordinated transition have deposit coordinators on staff. These staffers are available to help businesses make a smooth transition from start to well after the transfer has been executed.
They also can help ensure a smooth transition by offering training to staff and monitoring accounts to confirm money is moving as it should.
What is a typical timeline for making a transition from one bank to another?
On the lending side of a relationship, the timing is immediate because lines of credit and term loans are paid off, and the business starts using the credit facilities provided by the new bank. Deposit accounts, however, may take a few months to fully transition.
Once a business owner anticipates switching banks, which necessitates a change in checking accounts, he or she should contact any customers that are making automatic deposits.
Give them the date that the switch will occur and check in with them after the transition to ensure transactions are happening without incident.
Similarly, be sure to inform any business that is taking payments automatically from existing accounts when the change will occur.
Generally, expect the move to take place over the course of two to three months.
Transitioning from one bank to another might seem complicated, but bank staff are available to counsel business owners on transitioning smoothly and in such a way as to minimize pain. ●
Insights Banking & Finance is brought to you by Consumers National Bank
