One of the first things new business owners do when they are setting up their business is to open a bank account. After all, if they are in business to make money, they will need to put it somewhere.
With that said, most business owners don’t give much thought to how banking fits into their overall tech stack. Yes, tech stack. Today, accounting is run by amazing software. In fact, it’s not just one piece of software, but can be many that all have to work together.
The main hub of bookkeeping is the accounting software – which is typically QuickBooks Online or Xero. Business checking and credit card accounts are linked to the accounting software so that transactions can be pulled in and categorized.
What most business owners don’t know is that the vast majority of banks don’t interface directly with the accounting software, so third-party systems like Plaid, Yodlee, and others are used to pull the banking transactions through to the accounting software.
This all sounds great, until you experience reality – which is that not all third-party systems work the same, and not all banks cooperate the same. This results in incorrect data put into the accounting software – think duplicate and missing transactions. The other issue that can occur is that the bank feed can break, meaning it stops receiving bank transactions. When this happens, the main business owner is required to re-enter their credentials, slowing down the process.
Now, there is a solution to this problem – choosing the right bank to work with your accounting software. Some accounting software, like Xero, are working with banks to create bank feeds that interface directly with the accounting software without the need for a third party. Once set up, these run very reliably. Currently, Xero offers direct bank feeds from big banks like Chase, Wells Fargo, Bank of America, and some virtual banks like Relay Financial and Novo.
There are other things to consider with banks, such as their fees, minimum balances, locations, interest, bill pay, and ease of use. While we would like to say that there is one perfect bank, the reality is that it’s a balancing act to determine what needs are most important to your business.
It can be difficult and time-consuming to change banks as a business owner. Since many accounts are connected with automated deposits and withdrawals, it makes sense to take some time and get something set up from the beginning.
Feel free to reach out – we are happy to share our experience with business banking so that you can make the decision that is right for your business.