Most businesses today transact through their banks, especially as banking regulators and institutions across the continent and the world are tapping into the infinite capacities for electronic and digital banking to create a cashless society. With more transactions going through your bank accounts (and rightly so), you have to pay attention to managing your banking relationships more effectively. While managing your banking relationships, you should be cognizant of the following:
#1: Security:
You must be very security-conscious with internet banking passwords, tokens and other security features relating to your accounts. Cheque books, debit cards and credit cards and their details should be kept securely, and changed once you suspect a breach of security. Banks now deploy a number of enhanced security protocols for their electronic banking products for your added protection. Some banks even provide differentiated levels of authority on internet banking platforms, allowing your accountant or finance manager for example to be only able to capture payments, leaving you or others (as designated) to authorize before funds can actually leave your accounts.
#2: Bank Statements:
To monitor and track the activities on your bank accounts you should sign up for transaction notification services either through telephone short message service (text), email or both. If you use internet banking, you can also view and print your statements on-line. Again some banks are creating a variety of interfaces and products that allow you to stay very up-to-date on transactions taking place on your account. Some banks even send weekly statements to customers via sms highlighting opening balances, total withdrawals, total inflows and net balances, each week. As a business that is concerned about managing its cash flows and meeting its cash needs as and when due, it is important to explore the various means of getting detailed information on your accounts. The most traditional means is a periodic request for printed bank statements.
#3: Bank Reconciliation:
However frequently you review your bank statements; you should reconcile your bank statements with the records of your financial transactions that you keep within your organization. If all transactions pass through your bank accounts, i.e., all income and inflows are banked and therefore all expenses and outflows go through the bank accounts, then you should be able to reconcile your bank statements with your own accounting records. The reconciliation helps you to identify differences between the record of transactions that your bank has kept and the record kept by you or your accountant. When reconciling you compare the transactions of your bank statement with the transactions that you have recorded in your own accounting system. There may be items that appear on the bank statement that do not appear on your records or vice-versa. Once such discrepancies are identified, they should be investigated to properly understand what may have led to the differences. After investigation and review the records should be adjusted accordingly. Typical items that may cause differences may include bank charges that you have not captured, cheques that may have been returned unpaid and the bounced cheque charges; inflows that were received that have not been communicated, amongst others.
#4: Bank Charges:
You should be aware of the various charges that your bank levies on your account for maintaining the relationship and processing transactions. Until very recently banks charged Commission on Turnover for transactions on current accounts of businesses that varied with the level of activities (withdrawals) on the accounts. Today, most banks have migrated to a fixed monthly charge for the administration of business accounts. In addition to these charges, banks also levy their customers on other types of transactions: foreign remittances, issuance of cheque books, legal searches etc. When you reconcile your accounts on a periodic basis, you should look out for these charges, confirm their accuracy and capture them as part of your operational expenses in your accounting records. Sometimes when you are not paying attention to these bank charges, you may over-estimate the balances on your accounts.
#5: Account Signatories & Limits:
As your business grows, you may assign signatories for your business for your various bank accounts including yourself, some of your directors/senior managers. It is important to keep a record of all the names, signature mandates, and limits for all your respective bank accounts. When you do not keep proper records of your authorized signatories and the limits sets for each one, you can run into hitches with the issuance of cheques and authorization of transactions on your accounts. In addition to keeping these records, you should ensure that all correspondence regarding your bank account; copies of account opening documents and mandate forms/cards, letters and requests sent to your banks, bank statements and notices from your banks are filed properly for future use within your organization. Unfortunately, if anything goes wrong with your bank account and you have not kept proper records, you may find that you are unable to establish the root-cause of the problem and overcome it.
#6: Electronic/Internet Banking:
An important feature of banking today is the use of electronic/internet banking services and the proliferation and growth of such services from banks today. With the increasing focus on a “cashless” economy, banks are offering its customers a broad range of internet and electronic banking products. Your organization should also take full advantage of the flexibility; ease and convenience that these platforms offer to ensure that your financial transactions are managed properly. Businesses like yours can take advantage of the conventional internet banking services that allows you to transfer money and pay bills and vendors from your internet-enabled computers anywhere you are. You can also use the ATM facilities as well as credit cards that banks offer to businesses these days. Some banks also offer more sophisticated internet banking services that set authorization limits for various transactions and allows you as the business owner to appoint or engage an Accountant or Financial Manager who can capture financial transactions without authorizing the release of funds. The funds will only be released when you or other signatories have authorized those transactions. Your accountant may however have access to bank balances and statements to help him/her carry out the routine bank reconciliations and provide useful reports to you and your management team regarding your business’ financial position.
You should explore the various electronic banking products available from your bank, and be aware of the security features, charges and rules regarding the use of such platforms before signing on to them. Banks also offer e-commerce solutions like on-line payment platforms to support on-line purchases on your websites as well as Point of Sale terminals to support the use of ATM cards at your points of sale. Some banks even offer more sophisticated applications that integrate your bank accounts with ordering and payment systems that allow you track and account for your business revenue from multiple pay-points. Finally, banks provide SMS alerts via mobile phones and email transaction notification services to keep you constantly updated on activities on your bank accounts. If and when you do sign-up to such platforms ensure that all documents relating to those activities are properly recorded in your filing system.
#7: Relationship Managers/Officers:
Your relationships with your various banks will be managed by a relationship manager/officer assigned by the bank. It could be the bank staff that originally solicited you for the establishment of an account or someone else assigned by the bank for this purpose. It is important to know who your relationship manager is, have her full contact details and build a relationship with him/her. You should invite your relationship manager to your business premises, get him/her involved in using your products or services and attending your business events. The more your relationship manager knows and understands about your business, the better positioned he/she will be in providing banking services to support your business.
