Investing in Success: Choosing the Right Business Deposit Accounts for Your Company

Investing in Success: Choosing the Right Business Deposit Accounts for Your Company

Author: Tiffany Henn, CFO, FNBO Banking

You’re in business to make money, so it’s important that revenue generated remains available to help maintain market competitiveness. At the same time, you want to put available cash to work, earning interest or dividends to bolster your bottom line.

Enter business deposit accounts—fundamental components of effective financial management. These accounts can provide earning power and liquidity access, according to your company’s needs.

Different Business Deposit Accounts for Liquid Assets?

The types of business deposit accounts you choose will be largely dictated by the amount of liquidity your company needs. If you regularly withdraw cash to pay bills or make capital improvements, you’ll need easy-to-access deposit accounts. A business savings account is a great way to earn a little interest while keeping your funds available.

On the other hand, if your expenditures are infrequent, and you know when they will occur, it might make sense to park your money and put it to work. With deposit instruments, such as a certificate of deposit (CD), you lock in funds for a predetermined time period in exchange for a higher rate of return.

Businesses in the middle of the spectrum, those that need periodic access to cash, can benefit from an accessible account that offers higher returns than standard savings accounts. In this instance, a high-yield account, such as a money market, could be your best option.

A money market account typically bases the rate of return on how much is invested. You’ll earn more interest with a higher balance, but the money is always available should you need to use it.

How to Choose a Bank for Your Business Deposit Accounts

One of the biggest factors to consider when selecting a bank for business deposit accounts is how it will service your company. If you operate a small business and want to walk into a branch to make deposits or receive guidance, be sure there is a local branch nearby.

Because larger companies are more likely to phone in requests or make electronic transactions, branch locations may not be as important as the digital services offered. Find out if you can make electronic deposits and check balances online.

Another important consideration is insurance. Often, businesses are bound by bylaws or board directives that require funds be place in insured accounts. Other business owners may simply feel safer depositing money where it is protected.

In either instance, you’ll want to use a bank that is FDIC insured. With an FDIC-insured financial institution, your funds are protected up to $250,000.

If your balance exceeds this threshold, you can always transfer excess funds to an account at another bank, but to avoid this hassle, look for a financial institution that offers Insured Cash Sweeps (ICS). With insured cash sweeps, your bank partners with other financial institutions to protect your funds through multiple insured accounts. When you reach the threshold with one, money is automatically “swept” into another account with a lower balance, so your deposits always remain below FDIC thresholds. ICS accounts are also easy to manage because you only work with your primary bank.

Finding the Right Bank for Your Business

Perhaps the most important consideration when selecting a bank is whether the relationship will fit your deposit needs. Does the bank offer the level of returns and type of investment or deposit products you need to grow your money or provide the right level of liquidity?

Another factor to consider is how easy it is to access funds when you need to do so. Will your funds be immediately available, or will there be a delay of a day or more?

Finally, when thinking about access, ask the bank how easy it is to move money between accounts and gain access to tools that evolve as your business grows. For example, at FNBO, we provide a full suite of products for money movement transactions, including ACH, wire, lockbox, credit and virtual cards, and merchant processing.

Through these broad-based services, you can move cash coming into your company to the right account and move it back out as necessary. If you aren’t sure what you need, your bank relationship manager can easily guide you, providing advice on how to evolve your deposit strategy as your business grows.

With more than 166 years of operational experience, FNBO is here to assist you through both prosperous and challenging times, offering a range of business deposit account options to safeguard your funds while maximizing your financial potential.

About the Author

Currently the FNBO Banking Segment CFO, Tiffany has more than 20 years of experience in the financial services industry.