DEALING W

ITH F

INANCIA

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TUTI

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FINANCIAL INSTITUTIONS

• An institution that provides financial services for its clients or members

• 3 types of financial institutions•Depositary Institutions•Contractual Institutions• Investment Institutes

DEPOSITARY INSTITUTIONS

• These institutions accept an manage deposits

• They make loans

• Include:• Banks• Credit Unions• Trust Companies• Mortgage Loan Companies

INVESTMENT INSTITUTES

• An investment bank is a financial institution that assists individuals, corporations and governments in raising capital

• They help companies involved in mergers and acquisitions

• Some found in Canada: • HSBC• The Investors Group• BMO Capital Markets• CIBC World Markets• TD Securities• ING

SERVICES PROVIDED TO SMALL BUSINESSES• Businesses deal with financial institutions quite

frequently, even on a day-to-day basis.

• There are a variety of services that they provide to business, such as:• Nightly deposits• Automatic payroll deposits• Bank reconciliation• Everyday account activities• Loans• Investment

NIGHTLY DEPOSITS

• Some small business do not have a safe on location to keep money, important documents, banking records, etc. safe at night

• For these businesses, they are required to fill out a nightly deposit slip and put in a deposit bag, along with money to deposit at a bank

• Example: Most stores in the Lynden Park Mall use nightly deposits with CIBC

AUTOMATIC PAYROLL DEPOSITS

• Some businesses pay their employees with cheques, but many business use automatic payroll deposits

• Employees are paid directly to their financial accounts every pay period – every 2 weeks, every month, weekly – whatever the business uses

• Employees are required to provide financial institution information when they are first hired – VOID cheque or have the institution fill out a direct deposit form

BANK RECONCILIATION

• Sometimes a bank will have different account balances than the company’s own account records.

• This can be caused by:• Cheques issued have not been presented to the bank• Banking transaction has not yet been recorded by the company• Either the bank or the company made a mistake

Bank reconciliation is a process that explains the difference between the bank balance shown in an organization’s bank statement and the amount shown in the organization’s own accounting records at a particular point in time.

SHORT-TERM FINANCING

• Many businesses need short-term financing, especially during their startup phase. During this time businesses can secure loans from financial institutions.

• There are three common forms of loans that businesses deal with• Secured – A loan where the borrower puts up collateral

such as a car or house• Unsecured – No collateral is needed – credit cards,

personal loans, bank overdrafts• Demand – Loans with no repayment dates and a

floating interest rate that changes. Financial institutions can ask for loan to be repaid at any moment.