Changing banks can create meaningful benefits for a small or medium-sized organization. A new banking relationship may offer better technology, improved customer service, lower fees, stronger fraud controls, greater borrowing capacity, or products that better support the organization’s growth.
However, switching banks is rarely as simple as opening a new account and transferring the cash. Bank accounts are often connected to nearly every part of an organization’s financial operations, including payroll, vendor payments, customer receipts, credit cards, debt payments, tax filings, accounting software, and internal controls.
Without a coordinated transition plan, an organization may experience duplicate payments, rejected transactions, delayed deposits, payroll issues, missed loan payments, or gaps in financial reporting.
The following are some of the most important areas organizations should evaluate when considering a move from one bank to another.
1. Clearly Define Why the Organization Is Changing Banks
Before beginning the transition, management should identify the specific problems the new banking relationship is expected to solve.
Common reasons for switching banks include:
- High account or transaction fees
- Limited treasury-management capabilities
- Poor customer service or responsiveness
- Inadequate fraud-prevention tools
- Difficulty accessing credit
- Outdated online banking technology
- Lack of integration with accounting or payment systems
- Organizational growth that has exceeded the bank’s capabilities
- A desire to consolidate multiple banking relationships
Management should document its priorities and use them to compare potential banks. A lower monthly fee may not produce meaningful savings if the new bank lacks strong payment controls, responsive support, or the technology needed to operate efficiently.
2. Evaluate the Full Banking Relationship
Organizations should evaluate more than checking-account fees and interest rates. The review should consider the entire banking relationship, including:
- Operating, payroll, savings, and reserve accounts
- Lines of credit and term loans
- Credit cards and purchasing cards
- Merchant-processing services
- Remote deposit and mobile-deposit capabilities
- ACH and wire-transfer functionality
- Positive pay and ACH debit filters
- Lockbox services
- Sweep accounts and liquidity-management tools
- Online approval workflows
- User access and permission settings
- Accounting-system integrations
- Customer-service availability
- Deposit protection and cash-management options
The organization should also understand whether pricing is based on account balances, transaction volumes, bundled services, or negotiated relationship terms.
A bank may offer attractive introductory pricing that changes after the first year. Management should request a complete fee schedule and understand both the current and expected long-term cost of the relationship.
3. Review Existing Loan and Banking Agreements
Before closing any accounts, the organization should review its existing loan documents, credit agreements, leases, grants, and other contracts.
Some agreements require the organization to:
- Maintain its primary deposit accounts with a particular bank
- Use a specific account for automatic loan payments
- Maintain minimum deposit balances
- Obtain lender approval before moving accounts
- Provide notice when banking information changes
- Maintain cash reserves or compensating balances
- Deposit certain revenue or collateral into restricted accounts
Closing an account without reviewing these requirements could result in a covenant violation, missed payment, or loss of access to credit.
The organization should also determine whether moving its deposits will affect an existing line of credit or other lending relationship. In some cases, the best deposit bank may not be the best lending bank, but the organization should understand the operational and financial consequences of separating those services.
4. Inventory Every Transaction Connected to the Current Bank
A complete banking conversion requires an inventory of all transactions flowing into and out of the existing accounts.
Incoming transactions may include:
- Customer ACH payments
- Credit card and merchant-processing deposits
- Contributions and online donations
- Grant payments
- Tuition or membership payments
- Insurance reimbursements
- Investment transfers
- Intercompany transfers
- Marketplace and e-commerce receipts
Outgoing transactions may include:
- Payroll and employee reimbursements
- Vendor ACH payments
- Checks and electronic bill payments
- Credit card payments
- Loan and lease payments
- Federal, state, and local tax payments
- Retirement-plan contributions
- Health insurance and employee benefits
- Utility and subscription payments
- Insurance premiums
- Owner distributions or intercompany transfers
Organizations should review at least several months of bank activity and accounting records. Annual or quarterly payments can easily be missed if management only reviews the most recent month.
5. Create a Detailed Transition Schedule
The old and new bank accounts should generally remain open simultaneously for a defined transition period.
This overlap allows time to:
- Confirm that incoming deposits have been redirected
- Update automatic payments
- Clear outstanding checks
- Test new ACH and wire procedures
- Validate accounting-system integrations
- Resolve rejected or misdirected transactions
- Train employees on the new platform
- Complete bank reconciliations for both institutions
The transition schedule should assign an owner and due date to each activity. It should also identify dependencies—for example, new bank accounts may need to be opened and tested before payroll or merchant services can be updated.
Organizations should avoid transferring all available cash immediately. The former account should retain enough cash to cover outstanding checks, automatic withdrawals, bank fees, and other transactions that have not yet been redirected.
6. Strengthen Internal Controls During the Transition
A bank conversion is an opportunity to reassess internal controls rather than simply recreate the organization’s existing processes.
Key controls to consider include:
- Requiring dual approval for ACH and wire payments
- Separating payment preparation from payment approval
- Limiting administrator access
- Using individualized user accounts rather than shared credentials
- Implementing positive pay for checks
- Establishing ACH debit blocks or filters
- Requiring verbal verification of vendor banking changes
- Setting transaction limits based on employee responsibilities
- Reviewing user access periodically
- Enabling alerts for large, unusual, or rejected transactions
- Documenting emergency payment procedures
- Restricting who can add or modify payment recipients
Management should pay particular attention to vendor banking changes. Fraudsters frequently impersonate vendors, executives, or employees and request that payments be redirected to a fraudulent account. Banking information should be verified using a known phone number or other independent method—not contact information included in the change request.
7. Coordinate Payroll, Taxes, and Employee Benefits
Payroll and tax payments are among the highest-risk parts of a banking transition.
The organization should coordinate with its payroll provider to update:
- Payroll funding accounts
- Employee direct-deposit processing
- Payroll tax withdrawals
- Benefit deductions and remittances
- Retirement-plan contributions
- Garnishments and other employee-related payments
The timing of the change should be carefully planned. Switching payroll accounts immediately before a payroll date may create unnecessary risk.
Organizations should also update banking information with federal, state, and local tax agencies as applicable. This may include income tax, payroll tax, sales tax, business and occupation tax, unemployment insurance, workers’ compensation, and other required payments.
A missed tax payment can result in penalties even when the underlying cause was a bank conversion.
8. Update Accounting and Financial Systems
The new bank accounts should be properly established in the organization’s accounting system.
This process may include:
- Creating the new general ledger accounts
- Connecting bank feeds
- Updating payment platforms
- Updating expense-management software
- Revising cash-receipt workflows
- Updating reconciliation templates
- Reconfiguring financial reports
- Revising cash-flow forecasts
- Updating approval matrices
- Mapping merchant deposits and processing fees
- Documenting transfers between the old and new accounts
Bank-feed connections should be tested before the old connections are disabled. Organizations should also watch for duplicate transactions when both manual entries and automated bank feeds are used during the conversion.
The old accounts should not be deleted from the accounting system. They should remain available to support historical reporting, audits, tax filings, and future research.
9. Communicate Banking Changes Carefully
Vendors, customers, donors, employees, and other stakeholders may need to receive updated banking information.
Communications should be controlled and documented. Sending new banking instructions creates its own fraud risk because recipients may be accustomed to receiving fraudulent account-change requests.
The organization may want to:
- Provide advance notice of the change
- Use established communication channels
- Avoid sending sensitive information through unsecured email
- Provide a known contact for verification
- Track which parties have confirmed the update
- Follow up on deposits or payments sent to the former account
- Monitor for attempted fraud following the announcement
Customers and donors should receive enough lead time to update recurring payments. Vendors should also be informed when checks or electronic payments will begin coming from a new account.
10. Reconcile and Formally Close the Former Accounts
The final step is not simply withdrawing the remaining cash.
Before closing an account, the organization should:
- Confirm that all outstanding checks have cleared or been resolved
- Verify that recurring deposits have moved to the new bank
- Confirm that recurring withdrawals have been updated
- Complete the final bank reconciliation
- Record all interest and bank fees
- Download statements, check images, and transaction reports
- Retain supporting documentation
- Remove former users and revoke access
- Obtain written confirmation that the account has been closed
- Monitor for transactions rejected after closure
Unclaimed or stale checks should be handled in accordance with the organization’s policies and applicable unclaimed-property requirements.
Management should also consider whether a limited balance should remain in the former account for an additional period before final closure, particularly when the organization has a high volume of checks or recurring electronic transactions.
How Greenwood Ohlund Can Help
A successful bank conversion requires coordination across accounting, treasury management, payroll, internal controls, technology, and financial reporting.
Greenwood Ohlund’s outsourced accounting team can help organizations manage the process from planning through final account closure.
Our services may include:
- Evaluating the organization’s existing banking structure
- Developing a complete inventory of accounts and connected transactions
- Creating a bank-conversion checklist and implementation timeline
- Coordinating with bank representatives, payroll providers, and technology vendors
- Establishing new accounts in the accounting system
- Updating bank feeds, payment platforms, and reconciliation processes
- Reviewing user access and approval workflows
- Strengthening fraud-prevention and cash-disbursement controls
- Assisting with vendor, customer, and employee communications
- Reconciling both the former and new bank accounts during the transition
- Updating cash-flow forecasts and liquidity reporting
- Helping management evaluate treasury-management and credit options
- Documenting new procedures and training responsible team members
For organizations without a full internal accounting department, these transitions can place a significant burden on management. Greenwood Ohlund can serve as an extension of the organization’s team, helping reduce operational disruption while ensuring that accounting records, controls, and financial reporting remain accurate throughout the conversion.
Plan Before You Move the Money
Switching banks can improve an organization’s financial operations, but the benefits depend on the quality of the implementation.
A structured transition plan should address more than account opening and cash transfers. It should account for every receipt, payment, integration, approval, contract, and reconciliation connected to the organization’s banking relationship.
With the right planning and support, a bank conversion can do more than replace one financial institution with another. It can strengthen internal controls, improve cash visibility, modernize financial processes, and create a banking structure that better supports the organization’s future.
Considering a change in your banking relationship? Greenwood Ohlund can help your organization evaluate the operational impact, develop a transition plan, and manage the accounting work required for a smooth conversion.
Authors: Rosalie Claypool and Christine Chen, CAS Team
