Financial services are essential to running a small business efficiently, profitably and expansively. But figuring out what specific services are best for your small business is not always obvious, especially as financial needs change and service offerings from both traditional banks and non-traditional financial service firms evolve.
You may not be able to predict all requirements for the future. But you can figure out the basic services needed now and those likely for the coming months. A simple approach is to review the types of transactions in which your business engages and then evaluate techniques for managing your cash position.
Receiving Customer Payments
Consider how you receive payments and the steps that turn receipts into cash.
- Forms of payment accepted. Do you accept cash (currency and coin), paper checks, e-checks, charge cards, debit cards, prepaid cards and credit cards?
- Methods of accepting payments. What methods do you use to accept, process and settle transactions? Do you accept payments through face-to-face interactions at a brick-and-mortar storefront, remote kiosks, temporary locations, or customers’ worksites or homes? Do customers mail checks to a lockbox, enter payment information in a digital shopping cart, or pay via an electronic invoicing system?
- Number of transactions. Do you generate a high volume of small-dollar sales, low volume of high-dollar sales, or a combination of both? What is the average number of transactions per month? Do you have a busy season with the need to process an exceptionally large number of transactions in a brief time span?
- Dollar amount of transactions. What is the average dollar amount of each transaction? Should your business have safeguards to handle large amounts of money in single transactions?
- Speed, ease and price of settling transactions. How quick, easy and costly are transaction settlements? How long must you wait for your money? Are there multiple steps that you need to take in order to facilitate payment processing? What are the fixed charges and/or fee percentages to accept and clear customer payments?
Making Vendor Payments
Consider how you pay vendors and what is required to facilitate timely and accurate payments.
- Forms of payment accepted by vendors. What forms of payments do vendors require? Will you need special services to facilitate purchases from overseas vendors?
- Timing of payments. Do you need to pay vendors before your receive goods or services? Is payment due upon receipt? Can you get credit terms? Are there incentives for early payment of invoices? How often do you issue payments?
- Purchase controls. Do you have employees who initiate and approve purchases? Does your business need spending controls?
Managing Cash Position and Growth
Consider existing scenarios plus imagine ideal situations for managing cash position now and cash needs for growth.
- Funding for day-to-day operations. Do you have the funds available when vendor invoices are due? Do you make seasonal purchases well in advance of selling timeframes? Could consolidating account balances improve cash management? Do you have extra cash that you’d like to invest?
- Supporting systems. Could your business benefit from third-party systems that handle financial and accounting duties (such as an invoicing, project management, payroll or financial reporting) for the purpose of managing your cash position?
- Funding for growth. Do you need money to grow? Do you need extra cash to develop and launch a product line, expand operations, add new technology or reach new markets?
After you have defined your needs, search for solutions.
You may look to your neighborhood branch of a large bank to provide all the financial services your business requires. A small-business bank account and charge card may be perfect for a business with a few corporate clients and minimal overhead. A full-analysis or commercial account with treasury management, international and credit services may be more appropriate for companies that are engaged in global trade and have multiple locations.
But you might also get a basic account with a local bank or credit union, and arrange for more complex services with third-party providers. For example, you may contract with outside companies to accept e-checks or manage payroll on your behalf.
Finally, you may see that non-traditional sources of financial services may suit your requirements. Instead of applying for a business loan to expand your physical or digital presence, you can obtain funds from customers for equipment purchases or a crowdfunding site for a special project.
The more thought you can put into what you need, the better you can work with providers, traditional and non-traditional alike, to structure financial services just right for your business.Julie Rains is a senior writer at Wise Bread, a leading personal finance community dedicated to helping people get the most out of their money. Get daily money tips by following Wise Bread on Facebook or Twitter.