Small business owners: Leverage online banks for greater profits


If you’re a small business owner, I have some good news for you. You can easily reconstitute your banking relationships in a way to bump up profits and free up valuable time. You do that by finding the right online bank (or at the very least a bank with strong online capacity) and squeezing all the efficiency you can out of it to save you gobs of time and money. Fortunately, it’s not all that tough to do, as I hope to show you.

Why your not banking online can hurt you small business

Many business owners, myself included, first set up their banking as an afterthought. I get it:  You need an institution to process your transactions and park the money so bills can be paid.  You don’t have time or any good reason to look into the nuances from the get-go.

While this is understandable and makes sense for startup small businesses, over time the expedient route can end up costing you time and money. That’s what we’re about to remedy now.

In my experience, here are the things you need to do to find the right bank and maximize its value to your benefit:

1. Take inventory

What’s working and what isn’t about your banking situation right now? Is it too costly? Does it eat up too much of your time? What do you like about your bank? If you had a magic wand, what would your banking look like?

Be open-minded and take an objective look at your current banking set-up and what you really need. You can use your list of likes and dislikes to filter the various options.

If you haven’t already done so, be at peace with online banking. Some business owners balk at this. They have concerns about safety and privacy, and I understand those fears.

The reality is, we live in a virtual world now. There is so much information floating around that nobody is truly safe. And if you are a small business owner, you probably have more security online than if you keep data and cash on site.

That’s because the big banks have much greater resources to provide security (and insurance when there is a breach) than you have to guard your physical premises.

Embrace the online banking force ‘ it is your friend.


2. Don’t do business with a bank just because they have one good offer

Some online banks lure you in with free checking, high rates on deposits, or other shiny dangling objects. But don’t fall for that Jedi Mind Trick. Instead, go back to step one in our process and revisit what you value most in your banking relationship.

What good is it if they give you free checking (or something else) if what’s most important to you  is access to reps round the clock? What good is great service if what you really need is high rates on large sums that you keep in your account?

You see what I’m saying here? No one bank is right for every small business owner. You have to evaluate your unique situation and prioritize what is most important to you and then filter the banks accordingly.

Before we move on, I want to say a word about deposit rates: Even if one bank is offering you a bonus on your deposit, please check yourself. It may not be that great of an offer. I say that because rates are so pitifully low right now.

Let’s say your current bank is paying 1% on deposits and you can find another bank that pays 1.5%. That’s 50% more and it looks attractive, but is it really?

Let’s say you keep an average balance of $25,000 in your business checking account on a monthly basis. That extra .5% adds up to $125 over the course of a year ‘ or a little more than $10 bucks a month. Not bad, of course, but what do you give up in order to put that cash in your pocket? If it costs you $11 worth of headache to get that extra interest, it’s not worth it.

3. What to look for

As I said, you’ll sell yourself short if you select your online bank based on rates they pay alone. You also have to consider fees for the services you’re likely to need. Find out about minimum balances required in order to get those fees waived, while you are at it. Next, consider convenience.

Does the online bank candidate offer a wide network of free ATM machines? Sometimes these institutions have deals with out-of-network ATM providers that allow you to use them and get your transaction fees either waived or reimbursed. Find out.

Confirm that it’s easy to download your data into your accounting software. If not, move on.   Your time is valuable and you don’t want to waste it with a bank that doesn’t understand that very basic idea.

Next, make sure you’re dealing with a financial institution you can count on. Every bank has a “CAMELS” rating which examines the bank’s financial strength. Basically, the lower the number, the more stable the bank is. I suggest you only deal with banks that have a “CAMELS” rating of 2 or lower.


After that, confirm when the bank staff is available to answer your questions. Some offer phone support 24/7, which is a thing of beauty if you ask me ‘ especially for the small business owner.

Before opening your account, call the bank’s staff a few different times during the day. How fast do they answer? Do they know what they’re talking about? Do they care about you?

Last, make sure the bank can provide the kinds of services and accounts you really need. Not all online banks can open up any account you like. Some can’t open retirement accounts.  Others aren’t prepared to open a trust or TOD (Transfer on Death) account.

4. Consolidate, consolidate, consolidate

Now that you’ve selected the right online bank, it’s time to open your account and leverage the heck out of it. The first, most important step is to consolidate as many of your accounts as possible. It almost never makes sense to work with more than one bank.  If you do, you complicate your life and unnecessarily waste hours and hours coordinating your finances.

This goes for your personal accounts as well. The best thing I ever did was bring over my business and personal banking to the same institution. This makes it super easy to transfer money between my two entities and it’s just one more thing I don’t need to worry about. Joy!

5. Delegate and appoint

After selecting the right online bank, the second smartest thing I did when I set up my banking was to appoint one of my most trusted employees as my representative with the bank and ask her to reconcile the monthly statement.

This means I don’t have spend hours dealing with the minutia of the monthly financials or get involved every time a question comes up or we need to fix a problem. This is a huge time/money saver and I recommend you take this step as well.

Of course, this can be a little scary at first. But remember that you aren’t giving up control one bit. Review your bank statements, credit card statements and reconciliation reports carefully each month and you’ll still have your finger on the pulse of what’s happening in your business.  But do it this way and you’ll be able to do so in a fraction of the time you otherwise would.

6. Automate

As you’ve probably noticed by now, the big payoff of working with your online bank the right way is that it saves you tons of time — time that you can use to grow your business rather than doing administrative tasks.

And one way to save hours each month is to automate as much of your banking and investing as possible.


This includes downloading data into your bookkeeping software, paying bills automatically and moving money between accounts.

Not only will automation save you time and allow you to focus on making more money, it will basically insure that you will pay your bills on time. That has the added benefit of maintaining your strong credit profile and helps you avoid ever getting dinged for late payments.

RELATED: Top 13 resources for small business loans

Small business owners need to take their banking relationships seriously. It might be a pain at first to do the legwork and change things around, but if you take the steps I suggested above, you’ll reap the benefits of your small time investment for years to come.

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