Choosing a Business Bank Account

Whether you’re just starting out or are looking for a more small business friendly account, there are certain features that are important when choosing a bank account. First though, you may have noticed that I specifically said “business” bank account. That is because whether you're a sole proprietor, LLC or an S Corporation, I highly recommend having a business specific account. There are many reasons for this which I’ll cover in more detail in a later post, but one of the main reasons is to keep all of your business transactions separate from your personal activity. This makes tracking your income and expenses much easier and it lends some legitimacy to the business. 

So, what are the features that you want to look for in a business checking account? I’m glad you asked. Here are some of the key things I look for. If you’re short on time and want my #1 bank recommendation, you can skip to the end of this article.

No Monthly Fees

You have enough things to worry about as an entrepreneur. Making sure you have a minimum balance in your account or you don’t exceed a certain number of transactions should not be on that list. 

You need flexibility in your business accounts. 

Especially when first starting out, balances are going to fluctuate, or you may need accounts that house your federal and sales tax estimates which get cleared out each month or quarter. You should not be charged a fee for using your bank account.

Budgeting & Profit First Friendly

If you’re wondering what the heck Profit First is, I highly recommend checking out the book which you can find here or borrow from a friend or the library. The quick and dirty of it is that it helps teach business owners how to start paying themselves first by allocating your sales each month according to certain percentages.

In order to do that you need to be able to transfer funds between bank accounts and have some accounts with zero funds in them for most of the month. That’s why an account with no minimum balance requirements and no transaction limits is SUPER helpful. 

Even if you’re not following the Profit First formula, it’s nice to have a separate account for taxes or to budget for a course or investment that you’re interested in. 

User Friendly Online & Mobile Banking Platform

This is where I see even the biggest banks struggling the most. The online world is constantly changing and banks are having a hard time keeping up. You need a bank account that can integrate with the various payment apps that you use and that is easy to set up and manage from the comfort of wherever you're working. 

It should also play friendly with your accounting software, whether that’s Xero, QuickBooks, or another choice. Accounting software helps minimize the work that goes into tracking your income and expenses, but it’s only as good as the bank feeds that connect to it. If your bank feeds are constantly breaking down, it creates a time suck and headache for everyone involved.

Collaboration With Team Members

As we head more and more into remote work environments, your team may be spread out across the country. You’ll want to be able to collaborate with them and possibly even monitor their spending. 

You may have contractors that need access to certain accounts for marketing funds or other specific projects. You could have a team member that is responsible for paying bills and you want the option to approve the amounts before payment is made.

Your accounting and bookkeeping team more likely than not is in a separate location as well. Some banks have the ability to add a read-only user but for those that don’t your only option is to share login information which is not very secure. The best option is to be able to add users, choose their access level and be able to easily remove them if they are no longer part of the team or no longer need access. Again, flexibility is key!

Environmental and Social Impact

While all of the features above are very important, we believe it’s also important to work with businesses that align with your values as much as possible. We vote with our dollars and a bank account is one of the biggest investments you’ll make. Unfortunately many of the big banks that check all of the boxes above are also highly invested in fossil fuels and are not taking responsibility for their role in climate change. One solution that I have seen is to use these banks as a conduit for day to day activities but use a separate, more value aligned account, to house their savings. You can see a recent post on How to Green Your Finances for a list of “green” banks. Also, the bank I am recommending below is not on that list but does have a better track record than many of the big banks and is making efforts to improve their impact.

Who We Recommend

In the past I would have a list of bank accounts that I would recommend depending on the business type, location and where they already banked. But now I can unequivocally say that I recommend Relay Bank over all others. They are changing the way business banking works and it is a breath of fresh air. Relay Bank checks all of the boxes above and then some. 

Here are some of the features that make Relay Bank our favorite for small businesses:

• No minimum balances and no transaction limits
• Have up to 20 accounts with no fees (super Profit First friendly)
• Create users with specific access and even have cards mailed directly to them
• Directly integrates with bookkeeping and payroll software
• Excellent customer service
• Strong security; FDIC insured up to $250,000; ability to freeze cards

When asked about their environmental policies I received the following response from their team:

• In our new office, we are both paperless and implementing (this will be live in the next two weeks) a zero-waste office through a partnership with Go Java — everything from organics, papers and foil will be recycled or composted. This is a circular economy model, and as we spend with them, they also purchase and plant trees to offset their carbon footprint. (No Keurig machine, either!) 

• In terms of our investors, Bain Capital Ventures has this page about their social and environmental responsibility.
• We have also partnered with technical service providers that take an eco-conscious approach, such as Beanfield (our internet provider), which is focusing on being carbon neutral.

TLDR might be that we don't have a holistic formal policy, but are informally adopting concrete measures to build sustainably. 

And of course, we don't send out checkbooks :)

This was a promising response compared to what I have seen from other banks and the efficiencies that this company will create for small businesses is unheard of, even in big banks.

Frequently Asked Questions

• If I already have a bank account is it worth switching?
  • Only you can answer that question, but if you are with a big bank that doesn’t align with your values or a smaller bank that is adding a ton of administrative time, it might be a good idea to look at switching. You could set up an account and create a schedule for moving your activity over. It can be done all at once or in stages, whatever works best for you. If you're a client of ours we would be happy to support you in this.
• What if I want to support my local bank or one of the banks from the Green directory?
  • My philosophy is that you can do both. You can have a bank that makes your day to day operations smoother and then have the other bank be where you “park” your funds for tax savings, owner pay, payroll, emergency fund, or any other long term use. Relay makes outside transfers super quick and easy.

If you’d like to learn more about Relay feel free to send questions our way or you can check out their page here. Another great feature that I didn’t include above, is that if you are one of our clients we can help with the account setup as your adviser. This is a great tool for small businesses that I can’t recommend enough and I look forward to sharing more!