Anything that proposes to make life easier for a small business owner in a difficult economy is certainly worth consideration. Online banking has exploded in the past decade, and more and more businesses are recognizing its advantages over traditional banking.
Of course, if you've been managing your business and personal finances a certain way for most of your life, you might be hesitant to make the leap -- especially with something as important as the way you deal with your bank. And many people are concerned about security. Web scamming, viruses and the safety of sensitive information across networks are all legitimate concerns.
However, if you use trusted sites and are diligent about securing your Internet network (keeping your passwords secret, updating security and anti-virus software, and so on), you'll minimize threats [source: FDIC]. In fact, some argue that online banking can be safer than traditional banking, because your personal information is encrypted rather than on paper [source: ConsumerReports]. Online banking also allows you to monitor your account frequently so you can spot unusual activity quickly.
While online banking is most popular with younger generations, even older ones are starting to prefer it. According to the American Bankers Association, in 2011, 57 percent of Americans age 55 and older prefer to do their banking online, as opposed to only 20 percent who preferred it in 2010 [source: ABA]. If you've yet to make the leap, consider some of the following advantages over the next five pages.
With traditional banking, many transactions require time-consuming trips to the bank. Few business owners have loads of extra time to spare during a business day to battle traffic, getting to the bank simply to wait in line for a routine transaction. Instead, business owners can conduct such transactions from the convenience of their office or home -- or even while traveling. An Internet connection is all you need, and some banks offer mobile online banking. In addition, you don't necessarily have to be constrained to a bank's business hours. You can usually access your online account 24 hours per day and on holiday. (Keep in mind, however, that many transactions will only take effect during business hours.)
If you pride yourself on being environmentally conscious, you can also take comfort in the fact that fewer car trips to the bank means fewer carbon emissions. What's more, online banking takes much of the paperwork out of the banking process, which means less paper waste. If Americans opted out of paper statements, bills and checks, estimates say the action could save about 16 million trees [source: Shapley].
We spoke with David Munger of Online Resources Corporation, who said that transferring money is one of the unique business advantages of online banking. Businesses can order ACH (Automated Clearing House) transfers, which can be done overnight and are good for direct deposits, and wire transfers, which are more immediate and best for paying a vendor quickly.
Transferring between accounts is easy, too. For instance, Bank of America customers who enroll in the company's Small Business Online Banking program can transfer funds between several accounts, including savings, checking, lines of credit, credit cards and loans. And there's no extra fee for transferring between those accounts.
Some banks will allow you to give employees access to certain accounts and not others -- which is especially important for businesses. Munger says you can grant customized access, such as being able to view accounts but not transfer money. Or you can allow employees to initiate a transfer that can't go through without your approval. Certain banks also make it easy for their business customers to set up and schedule future and even recurring transfers. You'll be able to personalize the amount of the recurring transfer and how frequently it occurs.
Instead of dealing with the time and costs of checks, envelopes and stamps, many banks offer an easy (and often free) way to take care of your bill payments online. Online bill pay allows you to pay any company, or even individuals, with a few clicks on the keyboard.
If your business has an account with a company, for instance, you can set up a payment by plugging in the name of the company, the address where payments are sent and your account information. For an individual, you need to include his or her name and address. After you enter this data in once, the bank will store the information for any future payments you make. The bank will then send the check out for you.
For bills that vary each month, it would then be a matter of simply logging into your online bank account and plugging in the amount for this month's bill. For bills that are the same amount every month, you can set up automatic bill pay. If you're worried about setting up an automatic payment and forgetting to discontinue it, you can usually set an end-date.
Many small businesses already use QuickBooks or other types of accounting software to help them manage their finances. One of the great advantages of online banking is that many banks allow you to interface the information from your online bank account with this software. Note that this often comes with additional fees, but you might find the benefits worth the extra costs.
For instance, the process of reconciliation, or comparing the transactions in your business's accounting system with the transactions in your bank account, is made easier. You can set QuickBooks to download your account information automatically on a regular basis (even daily).
What's more is that QuickBooks allows you to import information from multiple accounts and even multiple banks. You may also be able to pay bills and transfer funds between accounts directly through your QuickBooks software rather than through your online bank account. Some versions of QuickBooks allow you to designate other users with customizable levels of access, which can allow small business owners to delegate some accounting duties.
Perhaps the best advantage of online banking for businesses is that you can monitor your account at any time and from virtually anywhere. This is also a perk of personal banking, but businesses arguably benefit from it the most because they often deal with a large number of daily transactions.
With traditional banking, you need to call the bank to check on whether individual transactions have gone through, as well as wait for paper statements to arrive in the mail to view a list of your transactions. Online business banking makes it as easy as logging into your account. You can verify whether checks have cleared or see images of cleared checks to verify details.
Is this the payment method of the future? No cash, no credit card, just your smartphone and your finger? Find out how Square works at HowStuffWorks.
- Bank of America. "Online Banking & Services." (Oct. 13, 2011) http://www.bankofamerica.com/small_business/online_banking_and_services/
- Barich, Thomas. "QuickBooks 2011 QuickSteps." McGraw-Hill Professional. 2010. (Oct. 13, 2011) http://books.google.com/books?id=QcYnGQbsRL4C
- FDIC. "Online Banking, Bill Paying and Shopping." Federal Deposit Insurance Corporation. GPO FCIC. 2009. (Oct. 13, 2011) http://books.google.com/books?id=1mEISz7DtjkC
- Fuscaldo, Donna. "Simplify Your Finances with Online Banking." Bankrate.com. May 25, 2010. (Oct. 13, 2011) http://www.bankrate.com/finance/savings/simplify-your-finances-with-online-banking.aspx
- Munger, David. Senior Vice President, Online Resources Corporation. Personal correspondence. Oct. 12, 2011.
- Wells Fargo. "Wells Fargo Business Online." Wells Fargo. (Oct. 13, 2011) https://www.wellsfargo.com/biz/online_banking/