We often pretend it doesn’t happen – but unfortunately it does – banks go down from time to time. They have scheduled downtime, system failures and mysterious unplanned outages that no-one really explains. The point is – they are imperfect and vulnerable like most platforms and systems.
Continuity
One thing not always considered by every small business is the possibility that the bank could be out of action when you go to create a critical payment or series of payments – even just a single working day’s worth of transactions are largely critical. It’s rare that a bank fails, but far less rare for them to experience system issues. It is worth considering how a banking outage would affect your organisation.
Therefore, one thing we recommend is maintaining an account with an entirely different bank that contains a reserve sufficient for a day or two of transactions – or a critical regular payment like payroll.
In order for it to be genuinely useful, the account needs to hold sufficient funds to complete those critical payments for a short period. It should also be integrated into the business so that any approval processes that exist on the primary account are mirrored here or policies exist to guide staff through the process of making payments using the contingency bank account.
Risk
In the UK, the FSCS provides individuals and businesses with £85,000 of protection should a bank fail. For small businesses this may mean a typical balance is always covered; for larger businesses it may be an additional reason to locate funds across multiple, unconnected banks.
In addition to the system contingencies approach outlined above, if your organisation regularly holds in excess of the FSCS insured limit, consider additional banking options to also minimise risk in the event of bank failure.
Planning
It’s not super simple to open a bank account. If you think this is appropriate for your business, get the wheels in motion now – it could take weeks to complete – even with digital-only banks.
Implementation
Once you have access to your account, ensure everyone else who needs access does indeed have it. Then, ensure those business critical payees are set up in the new account – or that you have a secure record of them that can be easily retrieved. Make sure that any limits or restrictions on this back-up account allow you to complete your estimated short-term payments but with adequate safeguards in place.