If you own or manage a small business, or even a medium-sized business, you know that margins are often slim. You can make a good living as a business owner, but you often have to reinvest much of your revenue into your business to keep it going and growing.
Inefficient banking practices can add up to a substantial hit for businesses, especially the smaller ones. The trouble is, these mistakes often do this silently, almost undetectably. Letting them go unchecked could ultimately be a business’s undoing. But what are these mistakes — and how can you avoid them?
1. Mixing Your Business and Personal Accounts
A good work–life balance might mean leaving your work at work and focusing on your family and hobbies when you’re at home. This is a good approach to take with your banking, too.
Keeping your business and personal accounts separate enables you to streamline your operations and maintain the integrity of your business structure. You don’t have to worry about mixing money, reducing the likelihood of large business payments coming out of your personal funds. Furthermore, a dedicated business credit card can help you build your business credit profile and protect your personal credit rating.
2. Disregarding the Fine Print
It’s always best practice to ensure you understand any contract you enter into. While signing onto a suboptimal cell phone plan is annoying, it probably won’t be financially ruinous. Entering into a bad business banking agreement, on the other hand, can halt your growth. Make sure you understand all the fees and terms associated with your business banking; never hesitate to ask questions.
3. Resorting to Slapdash Accounting
The U.S Chamber of Commerce states that many entrepreneurs make bookkeeping mistakes when starting out. These errors can result from outdated software, incorrect data entries and clerical errors, such as misclassified transactions.
Don’t look over your books when you’re tired or distracted — accounting requires dedicated time and attention. It’s also worth investing in modern, up-to-date tools and software.
4. Not Having a Financial Plan
You want your business to grow and generate more revenue. But, as much as “I want my business to make more money” may be a true statement, it isn’t a proper plan. Having a carefully crafted budget and cash flow forecast will help you make informed decisions and understand what to expect of your business’s finances. This is something you can discuss with a professional at your bank.
5. Choosing the Wrong Bank
Not all banks are created equal. Some offer great personal accounts, but not ideal business options. Some banks cater only to larger businesses and enterprises. You never want to sit down with a bank representative and feel like they’re rushing you out of there so they can meet their next client.
At Vectra Bank, we’ve helped many small- and medium-sized businesses thrive in Colorado. Contact a Vectra Bank professional today, and we’d be happy to go over your various business banking options.
