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28 Years Manufacturing And Export Experience On Money Handling Equipments
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28 Years Manufacturing And Export Experience On Money Handling Equipments
Are banking fees draining your business profits? Learn how to identify and reduce these costs with our comprehensive guide, and keep more revenue in your pocket!
Banking and credit card fees for businesses vary depending on different factors including the service provider, volume of cash, and your credit profile.
There are several types of banking fees but you can minimize or avoid them with careful planning.
Let's dive in!
Banking and credit card fees are your non-operating expenses that could pile up unnoticed to eat a sizeable chunk of your business revenue. These transactional and non-transactional costs create a significant presence in the non-operating expenses section, for cash-intensive businesses specifically.
You will incur different types of bank charges and credit card fees. Most of these costs are unavoidable but you can minimize them with careful planning.
Small businesses are usually prone to liquidity challenges anyway and if their cash is slipping to unproductive activities, they will sink further. It means their net profits will shrink and they wouldn't even notice this particular segment of avoidable costs.
Uncontrolled bank and credit card costs are a hole in the bucket of your business cashflows. And if you are already facing a cash crunch, this could further drain your cashflows and eventually profits.
The interest yields on most checking accounts remain low. Although some of the banking fees and costs are decreasing others like ATM costs have been consistently on the rise in the past few years.
You will incur different types of banking and credit card fees with varying rates. Some of these costs are fixed while others depend on specific metrics like the number of transactions, a certain amount, or meeting a criteria.
Here are a few common banking and credit card costs that your business incurs usually.
Don't be surprised with our list starters. Banks usually set a cash deposit fee for business accounts - both through branch banking and ATM deposits.
Although most banks are encouraging ATM deposits and eliminating deposit charges, some banks still incur this fee. Be mindful of the cash deposit fee if you are a cash-heavy business.
Some banks set a fixed number of transactions per month for business accounts while others set a dollar amount. If you exceed these limits, banks will charge you on a per-transaction basis or a percentage of the excessive amount in your account.
You will be better of to find a business account that doesn't restrict the transaction or balance limits.
Although many banks have eliminated the monthly service fee, some banks are still charging their account holders for this one.
This monthly recurring fee can range anywhere from $5 to $50 depending on your bank. A common option to avoid this fee is to meet a certain balance amount in your business checking account.
The non-sufficient fund (NSF) fee is a common one for both the retail and corporate account holders alike. Almost all banks set a minimum account balance requirement for their account holders.
If you open a business checking account and then do not operate it regularly, you will probably pay the NSF fee a lot. This could range anywhere between $25 to $50.
As a business owner, you will need to make a lot of local and international fund transfers. Wire transfers are quick but costly so you should use them sparingly.
Payments through checks and ACH can also cost you the same way. However, some banks offer no-fee ACH and checking payments for business accounts.
Businesses rely on overdraft facilities to meet their operational expenses but that doesn't come free either. Like any other business loan, if you are not repaying on time, you will pay interest.
The overdraft fee is another cost on top of the interest payments. Make sure to utilize only the approved overdraft limit to avoid the extended overdraft fees.
A business credit card comes with all those types of fees that you are used to with your personal credit card.
You will pay the card issuance charges, annual card fee, and interest on the outstanding balance with your business credit card. Some banks offer no-fee credit cards to large corporate accounts too.
Some banking and credit card fees like the overdraft fee are unavoidable. However, if you plan well, you can minimize these costs to boost your business profits.
Understand your business cash inflows and outflows first. It will help you plan for cash deposits, payments, and keep change for customers efficiently.
By keeping optimal cash at your disposal, you can minimize the number of transactions, maintain an adequate account balance, and avoid unnecessary cash transportation costs.
It will help you to minimize the interest costs and also organize your working capital requirements without relying excessively on external financing.
Explore different business checking account options before opening an account. Most traditional banks waive off typical transaction limits and maintenance costs if you meet a certain criterion.
For example, keep in mind the convenience of cash deposits, ATM networks, and geographical branch locations when choosing the right bank account for you.
Keeping a sufficient bank account balance can help you avoid several types of banking costs like overdraft negative balance, minimum account balance charges, and so on.
It is a stern challenge for small businesses to set aside cash for bank deposits only. However, mobilizing your bank account means you will have better control over cashflows as well as good record keeping.
Try consolidating cash transactions by supplier, client, or type of payment. It will help you stay organized and utilize cash more effectively.
It also means fewer bank transactions and easier tracking. Make sure to consolidate and keep good records of all transactions to avoid any hiccups.
One of the major reasons businesses avoid banking channels at all is the trouble with cash handling tasks. If you don't have efficient cash counting hardware, you will struggle to handle cash efficiently.
It will eventually lead you to avoid banking which will further deteriorate your cash efficiency.
Train your employees on the best cash handling practices and equip them with cutting-edge cash counting machines to increase their efficiency. It will help you improve cash flow and keep a better relationship with your banking partner.
