Entrepreneurs like you can have any number of reasons to change their business accounts from one bank to another. While opening the first bank account for your business may have been fairly straightforward, moving your money from one bank to another can be much less so.
At Remitly, we’re committed to helping business owners manage their finances. In this article, we’ll walk you through each step of moving your business banking account from one provider to another so you can rest easy knowing that nothing has been forgotten.
How to switch business bank accounts
Switching their business bank account is not a decision that most business owners make lightly because, even in a small business, you might have many different services, payments, or even other accounts tied to it. These could be payroll or your invoicing software, but it could also include less obvious links like your accounting software. So there’s plenty to consider when switching banks.
Understanding the benefits of switching
While it may be a difficult and involved process, switching banks for your business account should always be a question of trading up. A new bank might offer you services that you’ve found to be lacking in your current financial partner. These could unlock more financing options, better fee structures, more hands-on account managers, and other financial services. You shouldn’t feel like you’re having to sacrifice or downgrade in the process of changing banks.
Assessing your business banking needs
Because of these benefits, it can be tempting to jump ship to a new bank. However, it’s important to consider where your business is going and what you expect to gain from a new bank account. Some things to consider when deciding if you need to partner with a new bank are:
- Exceeding limits
Transaction and deposit limits may be holding you back. Consider looking for a business checking account that gives you more room to grow. - Fees on fees
If you’re getting hit with surprise fees that are beginning to become a hindrance to your cash flow, look into what another bank may offer you. - Insufficient funding
Your current bank may not be able to meet your funding needs. Moving to a smaller bank or credit union may open up more flexible loan options for you. - Not keeping up
As your business grows, you may find yourself needing a business credit card or payroll support. Though your bank may meet your current needs, others may offer better rates for these services. - Disappointments and frustrations
Your bank might be working out for you on paper, but maybe their customer service isn’t up to your expectations. If it takes too many phone calls and too much paperwork to solve your problems, it’s probably time to look for a better partner.
Research and selection
The bank account you choose will depend on what each bank offers. There are a couple strategies to keep in mind when comparing them, but of course, the best account will depend on what you need for your business.
Evaluating different business bank accounts
When it comes to finding the right bank for you, there are a couple of key factors that you need to look at. Each factor will hold different weight for different entrepreneurs, so consider them carefully.
- Fees: Know exactly which fees are charged and when. These could be monthly maintenance fees or penalties if you go overdrawn, for example. Banks will also sometimes offer fee-free periods for new accounts, which go a long way in saving you money.
- Overdraft: Speaking of overdrafts, not every bank will have overdraft protection on all of its accounts. This bit of insurance can make or break a banking experience when you’ve already got enough to think about with your business.
- Transaction limits: Banks may limit the size or number of transactions that you’re allowed. If you choose a bank that does this, make sure that they align with your current and future cash flow expectations—it might not matter when your business is a startup, but if you take off and grow quickly, this could become a problem.
- Interest: While some banks will charge fees, others may offer you interest on the money in your account. If your income is stable, consider looking into banks that offer high APY rates. The national average isn’t great, at about 0.07%, but some banks offer rates as high as 1.80%.
- Features: These little perks can make or break a good experience. Tools like accounting and payroll software linked directly to your account add a lot of functionality to your account experience and can save you money elsewhere. Well-designed apps and websites can also be key in keeping your daily financial operations smooth and painless.
- Customer service: Consider how important physical bank locations are for you. Some may enjoy this convenience and face-to-face interaction, but others may be satisfied with an entirely online or phone-based experience. Either way, make sure you know who your point of contact will be and when the customer service team is available.
Identifying the best bank for your business needs
Comparing potential new banks with your current one will give you a better understanding of where your current bank is lacking and what you stand to gain by switching.
Consider your typical transaction size and how many you make each month. Think about how often you’ve needed to reach out to customer service and what you got out of those conversations—what was most valuable, where they could have been more helpful, etc. Look into the fees you currently pay and see how they compare to other options. All of these can help with the decision of which bank to move to (or if you need to switch at all).
Prepare for the transition
Once you’ve chosen a new bank and account, it’s time to get ready for the big move. While moving is never easy, there are a few things you can do to prepare and make the change as smooth as possible.
Listing automatic payments and direct deposits
Take the time to look through all of the services and automatic payments or deposits that you pay for currently. Particularly important to remember will be payroll information, payment information for suppliers and software payments, and invoicing or billing accounts. You may also need to update any business consultants who assist you with your bookkeeping.
Communication with your current bank
It’s also a good idea to alert your current bank of the upcoming move. If you don’t, they may be surprised and regard any sudden change in your account activity as suspicious. By keeping them informed, you can also make sure that any movements you’re making aren’t setting off fraud alarm bells.
Executing the switch
Now that all your ducks are in a row, it’s time to press on with the actual changeover.
Opening the new business bank account
Whether you’re applying in person or online, you’ll need to present the necessary documents to the bank in order for them to make sure you’re eligible. These documents will include:
- Your information
You’ll need to provide photo ID, as well as provide your home address, contact information, date of birth and Social Security number. Anyone who holds at least a 25% stake in the business will also need to be included here. - Your business information
This may include information such as your employer identification number (EIN), the date your business was registered or formed, contact information for your business and the estimated number and amount of monthly transactions. - Documentation
This will include your business license and, depending on your type of business, any business name registration certificates, partnership or operating agreements, or articles of organization. Check with your new bank to be sure you know exactly what they’ll require you to present.
Transferring funds to your new account
Now’s the time to make sure you’re very clear on any sign-up bonuses, as they may require you to deposit and maintain a certain amount in your account during the first few months. Though money can begin to come in from your transactions, you’ll likely have holds placed on your deposits while your account is still new. Because of this, avoid transferring everything at once so all of your funds aren’t held up.
Banks will also be on the lookout for large deposits which are followed by large payments. This kind of activity can raise flags about potential money laundering and fraud. Plan any large money movements carefully at this time and make sure to speak with your bank if you have any doubts.
Updating transactions: automatic payments and payroll
Using the list of payments you made before, begin updating all your services with your new bank account number and routing number. Make sure your bookkeeping and invoicing software is integrated with your new bank account, if they provide that service, to track your income and expenditure. Don’t forget to update any transaction processing information with the new account to ensure your customers’ payments end up in the right place.
In short, think about every way that your money comes in, is paid out, and is tracked through your bank account.
Post-switch housekeeping
Let’s assume your new account is open, you’ve completed the transfer of funds and transactions, and everything seems to be operating normally. As it settles in, here are a few things you can do to safeguard your operations and reassure yourself that nothing got left behind.
Monitoring your accounts for errors
Keep an eye open for any fees or holds that aren’t clearly explained. If anything seems off, contact your new bank and do everything you can to make sure it’s cleared up for the future.
You may consider leaving your old account open and monitoring it for a month after you move into your new account. Leaving a small amount of cash in that account can make sure you’re covered in case you forgot to update a service with your new bank account information. Your old bank should have guidance on what will happen if money comes in after your account is closed. Otherwise, simply follow their standard procedures for account closure.
Ensuring a seamless transition with accounting software
Your accounting software will be a great asset during this transition. By keeping accurate books, you can make sure that nothing has fallen through the cracks during the move. If everything is tracked by the software, but your bank account isn’t reflecting a transaction, you can quickly spot and fix the missing link.
This process of reconciling your accounts is a great habit to keep up moving forward as well. Good luck with the switch!
FAQs
Can I have two business bank accounts?
Yes, you can. There’s nothing wrong with having multiple business bank accounts. This can be helpful as a means of protecting your assets or taking advantage of different interest rates. Be sure to stay on top of any balance minimums and any transaction limits which may affect your accounts.
How do I change bank account ownership?
Each bank’s process will be slightly different. You may be able to do it online, or you may be asked to fill out and provide some papers in person. Most importantly, you’ll need to update your business banking mandate which tells the bank who’s allowed to use or make changes to your account.
What’s the best business bank account?
The best business banking account is the one that most closely suits your needs. You’ll need to consider things like the fees and interest rates, any limitations on transactions, and the availability of customer service. If you’re considering leaving your current bank, start with the factors that have left you unsatisfied and look for the bank accounts that will help you improve on them.