Switching business banks without a missed payroll: a step-by-step plan

Open first, overlap, close last

The safest way to switch business banks is to open the new accounts first, run both banks side by side for one to three months while you move deposits, payroll, vendor payments, tax payments and automatic debits one group at a time, and close the old accounts only after a full cycle passes with no activity hitting them. The single most common mistake is closing the old account too early. Keep enough money in it to cover anything you might have missed until you are certain it is quiet.

I look after business deposit relationships at Frost Bank, and helping a company move its accounts over is a project I know well. The owners who have the smoothest transitions treat it like a small project with a list, a calendar and one person in charge, rather than something squeezed in between other work.

Before anything moves: build the inventory

Pull the last three months of statements from every account you plan to move and list every recurring item, both in and out. This is tedious, and it is the step that prevents almost every problem later. Do not rely on memory. Annual charges, such as insurance premiums, software renewals and licenses, are the ones most often missed, so look back at a full year of statements for those.

Ask your bookkeeper or accountant to review the list. They often know about payments that only show up quarterly, and they will need the new account details for their own records and for tax filings.

Name one person inside the company as the owner of the switch, usually whoever handles payables or the books, and give them the inventory as a working checklist with a column for the date each item was confirmed at the new bank. When questions come up, and they will, everyone knows who has the answer, and the new bank has a single contact on your side to work with.

• Customer payments: checks, ACH, wires, card processing deposits
• Payroll: direct deposit files, payroll provider debits, payroll taxes
• Vendors and subscriptions paid by ACH, card, check or bill pay
• Loan payments, leases and insurance premiums
• Federal and state tax payments
• Transfers between accounts and to the owners

Week one: open accounts and set up access

Open the new accounts with the right structure from the start. That is a good time to fix anything that bothered you at the old bank, such as too many accounts or none set aside for payroll or reserves. Expect the bank to ask for your formation documents and tax ID, and, for an LLC or corporation, information about the people who own and control it. Federal rules require banks to identify and verify the beneficial owners of companies opening accounts, including anyone who owns 25 percent or more. My guide to opening a business bank account in Texas lists the documents.

Then set up online banking users, approval rules and any treasury services you need, such as remote deposit, ACH origination and positive pay. Order checks and deposit slips if you use them. Fund the new account with enough to cover the first payroll and a few weeks of payments, while leaving a cushion at the old bank.

Take the time to set approval rules carefully now rather than copying whatever you had before. Decide who can enter payments, who can release them, what limits apply and who receives alerts. A switch is a natural moment to remove former employees from access and tighten controls that grew loose over the years.

Weeks two to four: move money coming in

Start with deposits, because getting cash into the new account first makes everything else easier. Update your merchant or card processor's deposit account, give customers who pay by ACH or wire the new details in writing, and update the remittance information on your invoices. Use a verified letterhead and tell customers to confirm by phone with someone they know, because fraudsters exploit bank changes by sending fake change notices of their own.

Customers who pay by check will keep sending checks to the same address, so that part usually takes care of itself. Deposit them into the new account from now on. For anything that still lands in the old account during the overlap, transfer it across promptly and note it so the books stay clean.

Card processing deserves a separate check. Ask your processor exactly when deposits will begin landing in the new account and watch the first few days closely. Many Dallas businesses that take cards every day find that a single missed batch is the first visible sign that a change did not go through, and it is much easier to fix in the first week than after a month of reconciling.

Weeks three to six: move payroll and vendors

Payroll is the item that cannot go wrong, so give it extra time. If you use a payroll provider, ask them how much notice they need to change the funding account and whether they require a test transaction. Make the change effective for a specific pay date, and keep enough in the old account to cover that payroll in case the change does not take. If you run payroll yourself through ACH, run a small test file from the new bank before the first real one.

Next, work through vendors and subscriptions. Update automatic debits with each vendor, move bill pay payees, and switch any business card autopay. Loan and lease payments may need a form from the lender. Tick each item off the inventory as you confirm it has moved, not when you submit the request.

The step people forget: tax payments

Federal tax deposits are easy to overlook until one bounces. If you pay federal taxes through the Electronic Federal Tax Payment System, update the bank account details there, and leave yourself time: the IRS notes that new EFTPS enrollments can take up to five business days to process. If a payroll provider makes your tax deposits, confirm they are drawing from the new account.

Do the same for state payments. In Texas that typically means sales tax and, for many businesses, franchise tax and unemployment tax filed with the respective state agencies. Your accountant can confirm which apply to your business and help update the payment details before the next due date.

How to know it is safe to close the old account

Watch the old account for at least one full monthly cycle after you believe everything has moved, and longer if you have quarterly payments. If nothing posts except transfers you made yourself, you are close. Then check for outstanding checks written on the old account that have not yet cleared, and keep enough money there to cover them.

When you are ready, ask the old bank to close the accounts in writing, transfer the remaining balance to the new bank, cancel any old debit cards and online banking users, and confirm that any treasury services are terminated so they stop billing. Download and save statements before access ends; your accountant will want them.

• One full cycle, or a full quarter, with no unexpected activity
• All outstanding checks cleared or accounted for
• Final statements downloaded and saved
• Cards, logins and treasury services canceled
• Closure confirmed in writing

What goes wrong, and how to avoid it

Closing too early is the big one; an old auto-debit hits a closed account and returns, and a vendor relationship suffers for it. Skipping the inventory is the second. Moving payroll in the same week as everything else is the third, because if something breaks you will not know which change caused it. Spread the work out and move payroll on its own.

Fraud is the fourth risk, and it is underestimated. A bank change produces exactly the kind of messages scammers imitate: new account numbers, updated payment instructions, urgent requests. Make sure your staff know that any request to change where the company sends money must be verified by phone with a known contact. I cover the wider defenses in my guide to protecting a business account from fraud.

Choosing the right time to switch

Avoid starting a switch in your busiest season, in the month of a big tax deadline, or right before a planned loan request. A quieter month gives you room to fix what breaks. If you are switching because you also need credit, discuss the timing with the new bank so the deposit move and the credit request support each other.

If you have not settled on a bank yet, my list of questions to ask before moving your accounts is the place to start, and if part of the reason for the move is that you have outgrown manual deposits and payments, read signs your business needs treasury management as well.

Having help on the other end

A switch goes far more smoothly when someone at the new bank owns the transition with you: reviewing the inventory, setting up the right accounts and services, checking that the first payroll ran, and answering questions as the old items move. For businesses in Dallas–Fort Worth that move to my bank, that is part of what I do, and I would rather spend an hour on the plan up front than an afternoon fixing a returned payroll.

Every business is different, and the timeline above is a pattern, not a rule. A company with a handful of vendors may finish in a few weeks; one with many locations or a lot of automatic debits may need a full quarter. Build in the overlap, keep the cushion and close last.

Questions people ask me