One of the first steps entrepreneurs must make when setting up their company is to open a business bank account. By opening a business or commercial account, entrepreneurs will enjoy several benefits, including access to different services and features that will help in a variety of ways.
But even if you have one of the best banks as your business partner, as an entrepreneur, you need to know that you could still potentially lose money. The reasons for these financial losses are usually so simple or basic that many business owners remain unaware that they are making mistakes that could be costing them a fortune.
Here are five of the costliest banking mistakes you should be aware of (and avoid making):
1. Choosing the wrong type of business bank account
There are different types of business bank accounts and selecting the wrong one can cause you to lose money or prevent you from earning any.
If you keep depositing your business earnings and profits in an account that pays little to no interest, you will lose significant amounts of money over time. You can avoid making this costly mistake by studying and understanding the kinds of business bank accounts available to you before opening an account. You can then choose the bank and the specific account that offers high interest rates.
Another way to avoid this mistake is to determine the amount you need to have in the business bank account and deposit any extra money into a banking product that provides a higher rate of return, such as a one-year time deposit.
2. Not knowing the ins and outs of your bank account
Another mistake that many entrepreneurs often make is being unable to determine and be mindful of just how much it costs to maintain their bank account. There are some banks that offer interest rates appear attractive; however, their products or accounts often come with steep fees attached.
Some accounts, for instance, will allow you to maintain a modest balance, but any gains made from interest payments will be eaten up by maintenance fees. You must also pay for several other banking services.
To avoid this money-eating mistake, gather all the details about the account you are interested to open, and run the numbers first to ensure you won’t lose money with the account you will choose.
3. Failing to maintain the minimum balance
Nearly all business bank accounts require depositors to maintain a minimum balance. If you don’t maintain this balance every month, your bank will be deducting fees – money that could add up to large sums over time.
On the other hand, many banks reduce or even eliminate monthly maintenance fees and other fees if depositors keep a higher amount of money in their account at all times. As such, to allow your deposit to earn more interest, consider maintaining a higher amount than specified by the bank.
It pays consider banks that offer a “no minimum balance charges” policy. You usually can access these types of savings and current accounts if you hold a salary account or other sister accounts from the bank’s group of companies.
4. Neglecting your bank statements
Lastly, another banking mistake that everyone makes, including business owners, is ignoring bank statements. As an entrepreneur, you need to keep in mind that all communication from your bank is important; therefore, you have to read and review them thoroughly.
Bank statements are often the earliest indication of any possible issues with a bank account. Since these statements list your balance, payments made, fees and returned checks (if any), you need to check every statement you receive.
When you do so, you will be able to spot mistakes immediately, such as overcharges that will cause you to lose a lot of money. You can then contact your bank to find out how you can be refunded and to prevent the overcharge from happening again.
In addition, checking your bank statements regularly should not be a problem since you can do this online or by using your bank’s app. You don’t have to wait for your monthly statements to go over them.
Your business statements contain sensitive information as well, so don’t just leave them lying around. Make sure you keep or dispose of them properly all the time.
If you want your money to grow in your business bank account, be wary of the usual banking mistakes. From the start, choose a good business bank and the right account. Keep track of your balance and find other ways to help your money earn more interest as well.