Changing banks or even banking processes can be a serious decision for small businesses. A disruption of any kind in a company’s cash flow can have a significant impact on its operations; however, with the many benefits of online business banking today, the move to cyberspace can prove worthwhile. Online business banking can deliver two things to small businesses that money just can’t buy—time and peace of mind.
Business owners across the country are already realizing the convenience and benefits of using this service. The percentage of small businesses that use the Internet for online banking has more than tripled in the past three years, rising from just 12 percent in 2002 all the way to 42 percent in 2005.
This trend in banking services comes as a result of companies discovering how this tool can help them manage their operations as efficiently as possible – meaning they can focus their time on tasks essential to running the business rather than administrative chores such as bill paying.
Small business owners also get peace of mind from knowing that with the enhanced security options available online, there is no more risk of fraud than with traditional banking. In fact, recent studies have shown that most security breaches occur not electronically, but through traditional paper-based theft such as checks or bank statements.
As you are reviewing your small business’ operational needs, consider the following online banking capabilities that may help streamline your financial operations and maximize your cash flow.
Work on Your Own Schedule Because you’re not constrained by “banking hours,” today’s online banking systems offer the same functions as your local branch, but faster, more efficiently and more cost-effectively than an in-person transaction. You can:
- Track account balances in real-time from anywhere in the world with the use of a computer and Internet connection
- Pay bills anytime—day or night
- Customize each vendor payment and employee paycheck
- Transfer funds between accounts
- Disburse your payments remotely
- Pay state and federal taxes
- Set up payments in advance, so bills get paid even when you’re on vacation
- Securely keep track of where your money is going
In sum, you can do almost all of the banking transactions online that you would typically do over the phone or in person. For example, business customers typically have access to an advanced version of BillPay, an online consumer program that’s become extremely popular among retail bank customers. After you set up your account, you can make vendor payments and distribute employee paychecks by following these simple steps:
- Make a list of all the vendors and service providers you pay regularly
- Specify payment amounts to be made to each service provider
- Key in when you want payments to be made (e.g., first or last week of the month)
- Log on once a month, click a button, and payments will be sent electronically
You automatically receive immediate confirmation when the payment is recorded in the receiver’s account. And the best part is, you can do this at your convenience from anywhere in the world.
Manage Payments and Payroll
Changing the amount of a payment you want to send or adding and deleting vendors is simple, and can be done at home before or after normal business hours. You can also set up payments in advance, ensuring that your bills get paid even when you’re on vacation.
Managing your payroll is another convenience. Most major online banking services offer users hundreds of preset templates to choose from that will enable you to customize each employee’s paycheck.
This program alone can free up several hours each pay period for you or your bookkeeper without the expense of hiring an outside payroll service. And with most online banking relationships, it won’t cost you extra. Functions include direct payments into employee retirement accounts; tax withholding; and debiting of child-support payments, where appropriate.
Take Control of Cash Flow
With real-time access to your account, you always know where your cash is and, more importantly, where it’s going. This is especially important if you have more than one account or do business with more than one financing institution. Many businesses have a primary relationship with a local bank where deposits are made every day. That may be convenient for you and your customers, but these accounts typically don’t pay interest on cash balances.
By connecting that account electronically to an online business investment account, you can sweep excess cash out of your deposit account into a number of investment choices. Then, just as easily, you can move the cash back into the primary account whenever you need it. The result can be a higher return on cash that once sat idle.
For tighter controls on cash flow, you may want to consider using an account with a debit card attached for all of your business expenses. You can log on anytime to see where the cash is going, and at the end of every month you or your bookkeeper can download that information directly into your in-house financial management program, such as Quicken® or QuickBooks®, streamlining your reconciliation process. This will automatically direct each expense into the proper classification, so all you have to do is print it out or send it electronically to your accountant at tax time.
For critical information, you may not even have to log onto your account. Many online banking programs will let you sign up to receive an e-mail alert or text message
whenever any of the following occurs: • A major vendor’s payment hits your books • Your account balance falls below a set level • Your quarterly tax payment is withdrawn from your account
Tighten Security Controls
Online banking can actually be more secure than traditional banking because most online banking services use 128-bit-encryption SSL (Secure Socket Layer) to protect your data. In fact, a survey by the Better Business Bureau, in conjunction with Javelin Strategy and Research, revealed that where the method of theft was known, 62 percent of information was obtained offline; only 11.6 percent was taken online.
Online banking functions can also enable you to decide who has access to what information. By setting up different levels of control, you can delegate more while instituting checks and balances throughout the system. For instance, with vendor payments, you can have one person set up the transaction but give another person the final authority to approve it. Or, you may want to give your bookkeeper access to information without control over the checkbook. You can set it up so that your bookkeeper can go into the account and download necessary information but is not able to conduct business within the account. If there are any errors or opportunities for fraud, you can pinpoint the exact location within each transaction instead of having to go through the entire system.
The old adage “time is money” has never been truer than in today’s global economy. Talk to a Financial Advisor about how online business banking can help save you both.
Nikos Kardassis is Managing Director, Business Development & Distribution, Global Bank Group at Merrill Lynch.
Merrill Lynch, Pierce, Fenner & Smith is a licensed broker-dealer, not a bank. Banking services are provided by licensed banks or by third parties through arrangements with licensed banks.