Over the past week, you might have seen some headlines about the collapse of the Silicon Valley Bank (SVB).
If you were tempted to skip over those items because it has very little to do with you, I understand.
Still, there are a few lessons that business owners in the UK can learn from this disaster, even though it’s far away.
The first hit home after someone sent me this harrowing account from an SVB customer, which he posted on Twitter…
I’ll let you read the whole saga, but the long and the short of it is that Alexander Torrenegra, founder of several well-regarded companies, used SVB both for his personal savings and for two of his companies. As soon as he realised there was a problem, he tried to wire all the money elsewhere.
That’s when things got hairy. Here’s the critical excerpt:
Essentially, they only had accounts with one bank, making it difficult to transfer their money elsewhere at short notice.
What’s worse, this business owner didn’t have easy access to the login details for his own company bank account!
By arranging his banking in this way, he had created a single point of failure. When their bank was in danger, the entire company was at risk.
And he was not alone. According to the BBC Technology editor, “The one thing everyone I have spoken to had in common was that not only was SVB their main bank – it was their only bank.”
Too many of its customers had put their eggs into that single basket, and lived to rue the consequences.
Now, your bank failing may sound extremely unlikely – although perhaps not as unlikely as you think, given that a second bank, Signature Bank, also failed in the US last week and Credit Suisse had to be bailed out by UBS.
The point still stands. If your company only has accounts with one bank you’re putting your business in danger. Forget the additional cost; a second account in a second bank is like an insurance policy. You may never have to use it, but in an emergency the back-up option will save your company.
We have certainly had cases where clients could not access their primary bank account, for various reasons – it’s not just because of issues with the bank…
Not having easy access to your account details is an even bigger risk. Yet I see this often from company owners who trust just one bookkeeper or someone senior with their bank details, and don’t realise how easily they might be locked out of their account – whether deliberately or inadvertently.
You need to make sure that more than one person has details of your accounts, and continually review levels of access.
Of course, when we manage your company’s finances, these kinds of checks-and-balances and safeguarding measures are built-in. We have best practice in mind at all times, and operate according to strict procedures designed to minimise risk of mistakes, fraud and failure.
It’s a critical part of running a finance department to world class standards, which many companies don’t think about enough – but as events this week show, we should.
Then email garry@insightassociates.co.uk or call me on 01279 647 447 to discuss how we can help you.
Warmly,
Garry
