Banks, Business & You: Proactive Strategies on Protecting Your Business

Mar 30, 2023 Banks, Business & You offers sound advice for success from ProCFO Partners

One of the most important facets of running any business is its financial health. After all, without a secure financial footing, it can be difficult to keep a business afloat much less move forward. Financial health requires partnerships for the system to run – including banking relationships. It’s an especially troubling reality, then, when part of those systems start to sputter. Recent headlines have created concern, and here at ProCFO Partners we’ve been in regular conversations with clients and banks to better understand risks and realities.

In this article, we’ll explore ways in which businesses can protect themselves from financial crises, as well as how to discuss creating a stable banking relationship. There’s a great deal we simply can’t control, from interest rates to a bank’s ability to manage and run to how federal institutions respond. That’s a pretty powerless feeling. Let’s talk through some things you can do.

Protecting Your Business

The first step to protecting your business is to understand the concept of risk management. Risk management is the process of identifying, assessing, and mitigating risks that could potentially have a negative effect on a business. It’s important to develop a risk management plan that outlines the steps you will take to protect your business from potential threats. This is certainly true in the face of looming financial threats or unknown, but risk extends to security, cyber-security, processes and other parts of the business where you need answers – right now – to questions like, “what if you wake up tomorrow and…”

When making financial decisions, it is important to take control of the process wherever you can. This means that you should be aware of the various options available to you, and make sure that you are making the best decisions for your business. It is also important to consider the long-term implications of any decisions you make. For example, getting better interest rates, distributing your liquid assets across different banks, making thoughtful decisions about where you money goes and why.

To break down your banking “protective” measures:

Understand your bank. More on that in a moment, but know – to the best of your ability – your bank’s health, their position on things, their general approach to businesses like yours.
When possible, consider spreading out your banking. Having multiple accounts across different banks insulates you from having emergencies if banks have emergencies, or if you have emergencies relevant to your bank. If an account or debit card is somehow hacked, for instance, it’s usually something the bank can make right. But, it might take a day or two to do that, during which reliable access for you can be an issue. Having other accounts, possibly elsewhere, that are untouched by the situation can turn a possible crisis into an irritating inconvenience.
Build a relationship with your bank.

Begin With The Banking Relationship

Probably the most important factor to consider in the banking aspect of your finance function is the quality of the banking relationship. We recommend seeking out a bank that is stable, reliable, and willing to work with you to make sure that your business is protected and your needs are met. Many small and mid-market companies have banking relationships with small local banks or started at a bank because it was familiar. We love local banks precisely for that familiarity – they know their community, and its employees and managers are members of the community. Still, they might lack some resources or options larger banks easily possess, such as large credit lines or investment options.

Ideally, you can have a relationship wherever you bank where you can talk to somebody about your business and any ideas, issue or concerns. That’s tough to do on a website chat bubble or a customer service center. Having a personal banker can make a big difference not just to the strategic functions of your banking relationship, but simply for peace of mind and proactive processes.

It’s also useful to stay up to date on the latest banking regulations and be aware of any changes that could potentially affect your business. Of course, keep an emergency fund on hand in case of unexpected financial difficulties is a best practice for any business.

Let’s highlight the value of extended financial relationships, like with your CFO or fractional CFO. Recent events have had many clients calling us ultimately for some peace of mind. Expert insights, guidance, and advice goes a long way in a complicated and complex arena like business finance. You’re often not looking for all the answers – just somebody to share questions with or advance understanding.

Conclusion

Proactively protecting your business from financial disasters requires a multi-faceted approach, from understanding risk management to taking control of financial decision-making processes. Despite the best efforts to protect a business, banking crises may still occur. Be aware of the potential impacts that these crises can have on your business, and be prepared to take the necessary steps to protect the business.

The best way to protect a business from financial crises is to create a stable banking relationship. This means seeking out a bank that is reliable and willing to work with you to ensure that your business is protected – or that you have direct-line access, whenever possible, to people who can help you understand and potentially mitigate issues. With the right strategies, you can ensure your business is well-protected in any economic reality.