Top Small Business Banking Mistakes and How to Avoid Them – Oswego County Business Magazine
By Deborah Jeanne Sergent
Yesour business finances are important to its success. By extension, your banking practices can also affect your success. A few banking executives in the region shared common banking mistakes small business owners tend to make and how to avoid them.
â¢ âNot working with a trusted partner, be it a banker or a CPA, you often have to work with someone. You need to update them both with what’s going on in their business. Talk to us now before it becomes a problem. If we’re in the dark and you have a problem, we don’t want to be surprised. You need full disclosure so that we are ahead of any issues ahead.
â¢ âNot keeping accurate records. Or wait until the end of the quarter before reconciling the accounts. You need to be aware of what’s going on with your accounts. Those who do not reconcile two or three months, there could be a problem of fraud. There are timing issues when you report fraud issues to a bank.
â¢ âDo not declare taxes. It sounds basic, but when you come to the bank and apply for a loan, we need your tax returns for the past three years. If you haven’t submitted a file for two years, we won’t be able to help you.
â¢ âFraud protection is something small business owners should be aware of. Monitor your accounts and make sure you can reach your banker when you need to. Community banks are more easily accessible than the larger ones. Local community banks, there’s a good chance someone will know about your business if you live, work, and bank in this area. We will discuss your loan application and someone will get to know you. If the approval is sent to Buffalo, they won’t know about your local business.
– Angelo Testani, senior vice president of commercial loans at Seneca Savings in Baldwinsville
â¢ âOne thing small business owners should be careful about when deciding who to bank with is to restrict their consideration to singular items, such as loan interest rates. It is very important to broaden your examination and examine the quality of the bank to understand the direct and indirect costs of doing business with that bank.
â¢ âThe direct costs of other services include things like checking account fees, wire transfer fees and overdraft fees. Indirect costs involve the time it may take you to resolve issues that might arise, including billing and other service issues. This is where the quality of communication with your banker plays a vital role. Is your banker an individual salon or is there a larger support team, including a relationship manager and branch manager, who jointly manage the account? Who else is on their team?
â¢ âThe depth of the bank’s expertise and services is important to consider. In most small businesses, time is money. When time is spent finding people to solve a problem or answer a question, it means there is no longer a need to focus on the core of their business. Ensuring that there are consistent banking contacts can help maintain stability and build a history of strong relationships with the bank.
â¢ âSmall business owners should learn about services like insurance, wealth management, 401K services, personal mortgages when evaluating a new bank. “
– Richard Shirtz, regional president of NBT Bank
â¢ âNot having a relationship with your banker or avoiding keeping your banker up to date with what is going on with your business is an all too common mistake. The more your bank / banker knows about what’s going on in your business, the more they can do to help you achieve those goals. It hurts a business in the form of a missed opportunity to take advantage of the expertise of its banker, etc., and potentially a longer and more difficult process to access capital – to borrow – when it needs it. or that it is ready.
â¢ âAnother common mistake is not having your financial information in order before you contact your bank to discuss a potential loan. All banks will be looking for financial information for the past three years (tax returns, financials, personal financials, etc.) Better yet, send it when you schedule the first meeting. Having this information ready to go before the banker even asks for it is a strong signal that you are very organized, well prepared and serious about your business.
â¢ âCustomers should have a clear understanding of their needs vis-Ã -vis the bank before approaching the bank. These needs should be communicated at the start of your conversations so that the bank can put you in touch with the right resource to help you with what you are looking for.
â¢ âWhile knowing what you are looking for is essential, not being open to suggestion is even more problematic. If you go to your bank and are only open to one specific preconceived solution, you lose the opportunity to explore a better alternative. Almost all modern banking needs have several potential solutions, and the range of solutions is constantly evolving. You are doing yourself a disservice by ignoring the options available to meet your needs. “
– Bill Murphy, Director of Retail Banking at Solvay Bank
â¢ âThe most important thing for a small business owner or a start-up is to have a written plan in terms of what the business is going to do, the goals of the business, a marketing plan and with that to discuss sales. It’s easy to deviate from the plan and necessary at times, but it’s important to stick to the plan. You will have defined sources and uses of income and this is crucial for the operation.
â¢ âAs a small business, it’s about recognizing what you’re good at. While there are certain areas like finance, it’s important to have a strong finance team or CPA inside or outside the organization to help manage cash flow. This is an option for some small business owners. Having someone else to advise is key.
â¢ âA small business owner may want to consider separate accounts for separate entities or separate sources of payment. It depends on their business banking needs. Setting up a business checking account is key to it all.
â¢ âThey could also benefit from lines of credit for short-term needs if it is available to them. It depends on their need. A short-term line of credit can help close short-term shortfalls in a short month or a slow season.
– Miles Bottrell, Vice President of the Syracuse Branch at Adirondack Bank