Cash flow is the lifeblood of any small business. The quicker you can translate your hard work into cash in the bank, the better.
Of course, one big key in all of this is the bank itself. The policies set by the bank can make a huge difference in your cash flow. Do they make it convenient for you to deposit your income? Do they work with you to quickly translate customer payments into cash? Or do their policies prevent your money from flowing as quickly as possible?
Here are six questions you should ask of your bank. If you're currently a customer with this bank and find that you're unhappy with a certain area of their service, you can - and should - ask them to alter their policy for your account (or perhaps in general). Many banks often have one set of policies for small businesses and another set for large businesses, so it can't hurt to ask. If you find that your bank isn't up to what you expect in multiple categories, you should ask around - and use these questions as part of your search.
Do they have an easily-available price list for their bank's services? I would consider it to be a red flag if they can't easily provide such a list. Some banks are hesitant to provide such a list because it enables customers to easily compare banks - and perhaps discover that the bank doesn't provide great prices or value for its customers.
Does the bank provide account analysis statements? Many banks provide such statements to their customers upon request. An account analysis statement shows not only the average balance level for a given month (both ledger balance and available balance), but also lists an abundance of additional information (like services used, transaction volumes, costs, and so on) that can be used to get a deeper look at what your bank is costing you. This should not replace your regular statement, but be offered in addition. Here is a sample account analysis statement, from Sovereign Bank.
How long does it take for cash to become available after a check is deposited? A good bank offers availability within 2 business days of deposit. Other banks can take as long as five days after the deposit. Know what your bank's policy is and, if it involves a long waiting period, ask them for an exception.
Does your bank offer a discount for MCR-encoded checks? MCR-encoded checks have the amount of the customer's check printed in magnetic ink on the bottom of the check - something you can do yourself very easily if you have such a machine. They're available fairly inexpensively on eBay and other auction sites. See if your bank will charge you less per check if you MCR encode them. If they will, it takes a surprisingly small number of checks to pay for the machine - and after that, the savings goes in your pocket.
What is the daily deadline for receiving availability? Many banks require you to have your checks deposited by 1 PM or 2 PM to be considered received that day. Otherwise, the checks aren't considered to have been received until the next business day. Look for banks that have a later deadline, which gives you more freedom in how you manage your payments.
How does your bank handled returned checks? You should be able to automatically deposit them. Does the bank have a returned item box service? If they do, you can adopt a strong returned check policy with your business. For a small business operating in a community, I would consider such a service to be a vital feature.
Is your bank helping you with your cash flow, or are they a hindrance? The answers to these six questions should help you to reveal the truth.