Actionable Steps Your Business Should Take Regarding The Silicon Valley Bank Failure

We wanted to send out a quick update in light of the recent events around the bank failures of Silicon Valley Bank and Signature Bank and what steps you should now take. While you may not have been directly affected by this, there are still some best practices to put in place to protect yourself in the future:

Have a relationship with at least 2 different banks 

  • It is best practice to have at least a secondary bank account and banking relationship in place. While you may not need to use this account on a regular basis, it can be helpful in cases of when your primary bank’s online banking goes down or in the extreme, your bank experiences a bank failure. Even if you currently bank with one of the big banks, having another banking relationship can help your business for future lending needs and reduce your overall cash management risks.

If your balances are regularly in excess of the FDIC insurance limits, work with your bank(s) treasury departments to reduce exposure

  • While the FDIC did backstop all deposits from Silicon Valley Bank and Signature Bank, that is not a guarantee that would happen in the future.  If you regularly have average balances in excess of $250,000 at your bank, you should talk with your banker about some of the treasury management products they have in place that can ensure your full bank balance is insured, like cash sweeps or IntraFi.  Some banks, in light of these bank closures, are automatically building in these treasury products for their customers.

Evaluate the vendors and software you use for payment flows

  • A surprise many small businesses faced is that while they did not use Silicon Valley Bank or Signature Bank for their banking needs, some of their vendors and software products they use for payments and payroll did and that caused disruptions to payroll being deposited to their employees or payments to vendors not going through. For example, businesses that used Rippling or Patriot for payroll failed to have payroll processed for a few days. At Lance CPA Group, we regularly evaluate the vendors we use and recommend for our clients, and our preferred vendors were not impacted by these closures due to the risk management practices they put in place. If you have any questions on particular payment vendors you use, let us know and we can discuss.

Have an active cash management plan in place

  • Understanding your cash sources and how much liquid cash you have available is important in case you suddenly lose access to a bank account or other funding source. This proactive measure will allow you to understand what actions you need to take in case something goes wrong with your bank. 

We at Lance CPA Group are here to help you walk through any questions you have regarding the recent events or how you can put best practices in place for your cash management functions.