Check it out Featured

8:00pm EDT July 26, 2008

No matter how big or small your business is, it needs a checking account to survive. Every owner knows this, making it one of the few easy decisions to make.

But, deciding which account is right for you and your business is a more difficult endeavor. While many services and features are offered by every bank across the board, each individual bank has its own individual intricacies. The key is to wade through all the bells and whistles to figure out what account will increase your business’s efficiency and productivity — without extra or hidden fees.

Luckily, there are several banking options for today’s business owner, says Mike Kramer, a business banking team leader with FirstMerit Bank.

Smart Business spoke with Kramer about business checking accounts, what to look for in them and why they’re so important.

When is it time for a company to look for a new business checking account?

Actually there are several reasons for a company to look for a new checking account; some are specific to changes in the company and some are market driven. As a company grows or enters into new markets, transaction levels and types may change. These volume changes may increase the cost associated with a particular account and the transaction types may increase the company’s exposure to risk. This is the perfect time to investigate available alternatives.

A second reason to consider a change is general changes in accounts offered by local financial institutions. New products and services are continually being introduced to the market, and it just makes good business sense to make sure you are getting the services you need at the most economical cost.

What features should one expect in a business checking account?

Specific features are somewhat dependent upon how the company receives and manages its cash flow. For example, a company that receives a large volume of smaller consumer payments has much different needs than a business with a few clients with high dollar transactions. However, in general, it is important to consider five factors.

First, is there a monthly maintenance fee and what type of compensating balance is needed to offset that fee? A $15,000 compensating balance requirement will cost you $300 annually in lost interest income assuming a 2 percent return on your investment. Second, how many transactions does that monthly fee or compensating balance buy you? Is that sufficient to meet the transaction needs of your business? Third, what is the cost of making a mistake, what is the fee for an NSF or overdraft occurrence? Fourth, what are the costs to access your money? Are there fees for ATM or PIN transactions? Fifth, does the bank you are considering have a full line of products and services to meet your needs both today and as your business grows?

It’s the Internet age; can you tell us a bit about Internet banking?

Internet banking is a powerful tool that helps owners save time and manage their businesses. It’s important for owners to realize the benefits of a robust business Internet banking platform in comparison to a standard personal Internet banking solution. Make sure you have the ability to assign user rights to trusted employees or advisers at the account level. It is also important to check how long transaction history and check and statement images are available.

Another consideration is the ability to download transaction activity to your financial software. Online bill pay is also a great service to save business owners money. Be sure to ask about fees associated with online bill pay, though. Also, ask what other Web tools the bank can provide to help you manage your business.

Debit card access is another feature many businesses desire. What is involved with it?

It is a relatively simple process to sign up for a debit card, which will allow you to access the funds in your business checking account. Check to make sure your bank offers zero liability protection against fraudulent use. You should also check to see if you will earn any rewards for using your debit card. By using your debit card for purchases, you may also have the ability to get both summary and cardholder management reporting, which allows you to track expenses by merchant category (i.e. gas, restaurants, etc.).

Is it difficult to switch checking accounts?

That depends to a large degree on the bank you are switching to. Look for a bank that will assist you through the process, one that has a reputation for a high level of customer service. While you will rarely change account relationships, for banks, completing these changes is a part of daily business. This not only applies to the mechanics involved, but also to getting you into the account that’s right for you, with a full suite of ancillary services to save you time and money.

Is there anything else to consider?

Yes, getting the right account for your business should be your primary concern, but you may also want to look into a workplace banking offering for your employees. This is a nice benefit you can provide your employees at no cost to you.

MIKE KRAMER is a business banking team leader with FirstMerit Bank. Reach him at michael.kramer@firstmerit.com.