The business savings account is a financial tool that provides far-reaching security for a company and helps push it down the path to growth. And it does so all while working quietly in the background. Of course, taking the right approach for your business requires more than mere luck.
Read on for an in-depth look at factors you should consider when it comes to opening a business savings account — interest rates, account terms and more.
What is the Business Savings Account?
Much like the savings accounts you use to safely store and grow your finances in your personal life, business savings accounts serve as a secure place to house funds for your company’s use. They’re something of a financial cushion for a company, at the ready when the time comes for emergency expenditures, supply purchases and the like.
As for what such an account offers, that will vary based not only on your chosen financial institution, but the specific account you open. One selling point that applies to most any business savings account out there, however, is the fact that it allows you to accrue interest based on the amount of money saved up.
What Benefits Does a Business Savings Account Offer Your Company?
Besides the obvious selling point such an account brings to the table — the fact that it stores money your company can use as it sees fit — there are other ways your savings can serve as a boon to your business.
Safeguards in Place for Surprise Expenses: Equipment breakdowns, last-minute travel needs, natural disasters and similar obstacles never seem to happen when it’s convenient. Your business savings account provides a way to cover costs to right the situation and keep business moving forward unimpeded. Experts generally advise businesses to have six months of operating expenses saved up, but any amount can help.
Better Control Over Business Spending: Credit and debit card transactions are quick, efficient and secure — but that convenience can result in business expenses that get out of hand. Your business savings account requires a bit of added work to access funds, making it easier to know where your money’s going and to curb expenditures that aren’t 100% necessary.
Improved Standing Among Potential Lenders: Banks and credit unions aim to get as full a financial picture as possible of a person or business before deciding whether to grant their request for a loan. They’ll often factor account balances into the mix, along with credit scores, payment histories and the like. A solid balance in your business savings account can position your company as a safer investment for your lender.
Increased Protection Against Fraud: Although today’s checking and savings accounts are incredibly secure, fraudsters are always looking to get their hands on what isn’t theirs. The more you access a given account, the higher the likelihood that someone might gain access to it. Transaction volume is typically much lower for business savings accounts, as compared to checking.
Additional Income in the Form of Interest: One of the biggest overall benefits to opening a business savings account is the fact that your account will garner interest. Although earnings will vary by financial institution, your specific account and even economic conditions, this truly is a “set it and forget it” form of financial growth.
How Much Should a Business Have in Savings?
We’ve already mentioned that many financial pros recommend having several months’ worth of operating expenses saved up for emergency situations. As for specific savings goals, however, those will vary based on factors such as company type, how long you’ve been in business and both long- and short-term plans.
A good rule of thumb is to determine a certain amount — be it a set figure or a percentage of the revenue brought in — and add it to your savings account each month. Whether you do so via in-person deposit or by transferring funds electronically from your business checking account, this simple habit allows you to grow your funds with little to no additional time or trouble on your part.
How Do You Find the Best Business Savings Accounts for Your Needs?
As with any business decision, it’s important to take the time to do your research. You’ll want to find a business savings account that helps bring your unique goals within reach while keeping your funds protected. Here are a few factors to consider.
Account Requirements: Is there a minimum deposit amount you need in order to open your business savings account? Will you be penalized if your balance falls below a certain amount? Are you limited to a certain number of withdrawals per month? (If the answer is “yes” to any of those questions, do the terms make sense for your company?) Covering the finer points of your potential account can save you from dealing with costly fees and unnecessary frustration down the line. A quick phone call to your bank can help you make sure you’re on the right track.
Ability to Earn More: The saying goes that a person’s money should work for them. As it relates to your savings account, that means interest. If your company’s standing qualifies you for a high yield business savings account, for instance, that can be a great way to continue boosting your income. Don’t forget to factor compounding in. Depending on the type of account you open, interest might be earned on a quarterly, monthly or even daily basis. It could even take place once per year. In general, more frequent compounding results in quicker earnings.
Financial Institution Reputation: No two banks or credit unions are alike, and it’s important to find one you can trust. Seek out a bank that is well established in the community, has a helpful, friendly staff you can work with and is backed by the FDIC. Doing so doesn’t just make your visits more enjoyable, but helps ensure your funds are protected. Independently owned Central Bank, for instance, has been around for more than 65 years, and we’re proud to give back to Houston, the city we call home.
Central Bank Tip: If you’re interested in learning more about the benefits of working with a local bank like ours, please visit our blog post which goes in-depth on just that!
We hope the above has helped to shed light on the benefits a quality savings account can offer your company — and how to go about finding the right one. If you have questions about anything you’ve just read, or if you’re interested in learning how Central Bank can help your company grow, feel free to contact our team. Our Houston bankers are a friendly bunch, and we’re always happy to help our friends and neighbors in the Bayou City. We look forward to hearing from you!