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Published byWilfred Parsons Modified over 8 years ago
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DEALING WITH FINANCIAL INSTITUTIONS
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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
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DEPOSITARY INSTITUTIONS These institutions accept an manage deposits They make loans Include: Banks Credit Unions Trust Companies Mortgage Loan Companies
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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
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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
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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
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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
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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.
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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.
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