09/16/96 BOOTING UP YOUR FRIENDLY BANKER

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BOOTING UP YOUR FRIENDLY BANKER
More small businesses are balancing checkbooks and paying bills via PC
While waiting for a flight back to New York from Alaska, James Cardwell struck a few keys on his laptop to check his company's account balances before wiring money to Australia. ``The records are immediate, and it's cheaper and easier than going to the bank,'' says Cardwell, the chief financial officer of Daglow Exploration, a company that searches for and mines gold in Alaska.
The convenience of doing an international wire transfer or balancing the company checkbook anytime, anywhere, is attracting thousands of small businesses to banking by PC. ``Banking software eases the administrative burden and allows entrepreneurs to concentrate on what they do best,'' says Sam Northrop III, senior product manager for Barnett Banks Inc., based in Jacksonville, Fla. Barnett has 1,800 of its 140,000 small-business customers using PC banking programs. That's a 70% increase in the past 18 months.
LUCRATIVE. Although banks have long provided electronic services for large corporations, until recently they had overlooked the small-business market. But now, ``all banks are looking for a small-business PC banking product if they don't already have one,'' says Rich Hutchinson, president of New York-based BankLink, which supplies the software and service. Banks see the PC-banking market as an opportunity to nab new customers, reduce traffic--and thus, employees--at branches, and to increase revenue through ongoing fees. What's more, banks are beginning to view small business in general as a lucrative and underserved market.
About two-thirds of the banks catering to the market buy from vendors such as BankLink, Harbinger, Politzer & Haney, EC Partners, and Sterling Commerce. NationsBank, First National Bank of Maryland, and Bank of America, to name a few, then put their private label on the programs. When customers use the software, they're connected to the vendor's database, which stores financial data downloaded from the bank. Other banks, such as Citibank and Wells Fargo & Co., sell proprietary software and deal directly with customers through their own databases.
Regardless of the source, an authorized user must first enter a series of pass codes before gaining access to any data. Then the user dials into a private, dedicated line at the bank or its vendor to download information. The data is encrypted before it is transferred.
The programs all offer standard features such as the ability to stop payment on a check and move money between preauthorized intrabank accounts. Users can also obtain account balances and identify checks and deposits that have cleared. ``I was always calling the bank with one question or another,'' says Laura Howard, the office manager of Old Line Co., a real estate development firm in Baltimore. ``Now, when a vendor asks where the payment is, I can immediately tell not only when we sent it but that it cleared our account.''
Depending on the program, financial information is updated every morning or continuously throughout the day--called batch time or real time, respectively. And customers can view up to 90 days of transactions. Most of the programs do automatic account reconciliations. The software highlights such mistakes as transposed numbers or checks that weren't previously recorded. Customers can also download data from accounting software and use it to make forecasts.
RED ALERT. A test run of several programs gleaned few differences between the setups. Each offered user-friendly functions and easy movement among tasks regardless of whether the software was DOS- or Windows-based. (Citibank also offers a Mac version.) The readability of the data varied, however. Take Politzer & Haney and Sterling Commerce programs, used by Bank of Vermont and Mechanics National Bank of Richmond, California, respectively. Both reported financial information with bold type and easy-to-distinguish markers between accounts. Wells Fargo's Gateway program uses bright colors and vivid graphics. By contrast, BankLink, Harbinger, EC Partners, and Citibank presented data in a traditional accounting-ledger format with small, harder-to-read type.
What about other distinguishing features? Some vendors, such as BankLink (which counts Banc One and National City among its customers), Harbinger (Barnett Banks, Bank of America), and Politzer & Haney offer a direct-deposit payroll service. Using the wire-transfer function, business owners can move money from an interest-bearing account into the payroll account and then have funds deposited into employee accounts.
PC banking also makes it convenient for authorized employees to carry out transactions. ``Every two weeks, I had to chase down one of the four doctors who were check signers to get an authorization to transfer money between accounts,'' says Barbara MacGregor, who does the books for Northwest Radiology in Indianapolis. Now, she can enter her own pass codes to complete transfers.
BankLink, Harbinger, Politzer & Haney, and Sterling Commerce can also pay federal and state taxes electronically. Beginning in mid-1997, the 1.2 million business taxpayers who owed at least $50,000 in employment taxes during 1995 must pay federal taxes electronically or face a 10% penalty of the total owed. Already, some 20 states require business taxes to be paid electronically. And some services, such as EC Partners (a supplier to NationsBank and Union Bank of California), Harbinger, and Citibank offer electronic bill payment to suppliers. In some cases, users can pay back business loans automatically. And because customers can check the status of their finances every day, they can pay loans and credit lines faster--as soon as money becomes available, notes Chris McLaughlin, vice-president for Bank of America's business-banking division.
One of Bank of America's three PC banking programs, Home Banking for Business, is unique in that it gives customers access through America Online and the Internet. Customers of other banks have to install software in a PC, then dial in by modem to the database. A creative feature in the Wells Fargo software is the ability to set a dollar amount that triggers a red screen with a warning that cash is running low, sort of like a fuel gauge.
There are a few disadvantages to banking by PC. A computer transmission or communication problem could hamper immediate banking needs such as meeting payroll. Technical support might not be available when problems crop up.
FEWER VISITS. Initially, the setup costs and monthly charges make banking by PC more expensive than regular banking. A user will pay about $50 for software setup and an average monthly charge of $15 to $50, depending on the account type and usage. Some banks charge up to $100 a month for PC banking, while Citibank and Bank of Boston have waived all fees. But overall, using the computer leads to significant savings in bookkeeping time and efficiency, says Barnett Banks' Northrop. Some services, such as transfers and stop-payment orders, cost less when done electronically. Bank of America's Business Connect Delux service, which costs $39.95 a month, allows users to make domestic and international wire transfers for $7.50 and $12.50 compared with $30 for either at a branch.
Despite a few small drawbacks, the cost-effectiveness and convenience of PC banking make it a useful tool for small businesses. ``Banking by PC won't entirely eliminate the need to visit the bank, but it will cut down on the number of trips,'' says William Murray, senior vice-president at First National Bank of Maryland. And every small-business professional can certainly find more productive uses of time than running out to the bank.
By Toddi Gutner in New York