Online Banking Use this new technology, and leave long bank lines behind.

Think of some of the disadvantages of traditional banking--longlines, inconvenient hours, the wait for monthly statements--andyou'll discover the advantages of online banking. A typicalonline account allows you to bank 24 hours a day, seven days aweek. If you have a computer, a modem and a telephone connection,you can access your account, whether you're in your office, athome or on the road.

There are two different types of computer-based banking:

With online banking, if your bank or credit union supports asoftware program such as Quicken, QuickBooks, Microsoft Money orManaging Your Money, or offers its own software (usually free), youstore financial data on your computer, transferring informationbetween your computer and your bank's. Using yourfinancial-management program or bank-supplied software, youmaintain your records, view the latest information about youraccounts and have the bank write checks from your accounts to paybills. Nationally known banks such as Chase Manhattan Bank(http://www.chase.com/ ), FleetBank (http://www.fleet.com/ )and Bank of America (http://www.bankamerica.com/ )provide this type of online banking.

Some banks offer Internet banking, which allows you to use thebank's software and computers to maintain your recordsand pay your bills. You can opt to use your financial-managementprogram instead.

The main difference between online banking and Internet bankingis the location of records. Online banks supportfinancial-management software installed on your computer. Internetbanks provide software on their computer systems, so usersdon't have to store records or software on their owncomputers.

You won't have to wait for a monthly statement with eithersystem; banks update accounts every day, and you can view youraccount information any time. For example, you can see if animportant check has cleared or a deposit has been made. Becauseyour account is always up to date, it should be much easier tobalance your books at the end of the month.

You'll also be able to avoid envelopes, post office linesand check writing because the bank issues electronic or paperchecks for you. You don't have to give up paper checksaltogether if you use a financial-management software program onyour computer. Even if you don't have your own software, thebank will still issue paper checks for you, but you'll have tocall them and request this service.

If you use financial-management software, you can produce avariety of forms, using templates defined by the software developeror custom forms that you create. Other advantages include theelectronic transfer of money between online accounts, automaticpayment of recurring bills and messages that alert you to pay aparticular bill at a particular time.

"The advantages of online banking are that it's quick,easy and inexpensive," says Eric Holmquist, atechnology-solutions consultant for an accounting firm in Glendale,California. "However, don't have high expectations yet;the technology is maturing. There are some good opportunities forcash management, but don't throw out the checkbook just yet. IfI were running a small business now, I would update my registersand pay bills manually, because online banking still takes a lot ofeffort. But for things like checking balances, transferring funds,and researching checks, online banking is great."

Many banks don't offer online banking yet, and manyorganizations don't accept electronic checks or don't knowwhat to do when they receive electronic payments. Electronicpayments are credited directly to a company's bank account, sothey don't even need to be online to receive them. But if youcan't include an invoice with your payment, some businesseswon't know what the payment is for.

Sometimes paper checks are required. For example, if you have tosubmit a registration form or an application, you may have to use apaper check. To address these problems, many banks offer the optionof paying with paper checks that they issue and send for you. Youwon't have paper copies of these checks; however, you'll beable to view the image of a particular check on your computerscreen, and information about the check will appear in yourelectronic check register.

Because electronic payments are almost instantaneous, companieswith cash-flow problems might have to spend more time paying billsthan they would if they were issuing paper checks. They'll needto be sure they have enough money in the bank to cover the checksthey send; transactions are processed quickly when mailing time iseliminated, so they might have to pay some bills and then wait fora few days to pay others.

"The advantage of online banking is primarilyconvenience," says Irvin Feldman, a Certified ManagementAccountant in Flushing, New York, whose firm helps companies useaccounting software. "The main disadvantage is that, unlessyou keep track of your accounts, things can easily get out of yourcontrol. You must keep careful tabs on bank charges, verify alltransactions for accuracy and make sure that the transactions areproperly authorized. In small businesses, this isn't alwayspossible, because tracking bank accounts can be a full-timejob."

Sandra E. Eddy is the author of The GIF Animator'sGuide (MIS:Press, $39.95, 800-288-2131) and Mastering LotusSmartSuite 97 for Windows 95(Sybex, $39.99,510-523-8233).

Is Online Banking Secure?

"Worry about online transaction security is much ado aboutnothing," Holmquist says. "You have 10 times moreexposure when you give someone your credit-card number over thephone--particularly a cellular phone--or on mail order forms thanyou do through the Internet."

The financial-management program Quicken, for example, allowsyou to protect your accounts three ways:

• It encrypts data (that is, translates the data into ascrambled format) as it's being transferred betweencomputers.

• You must type a Personal Identification Number (PIN) to accessan account. When you first start an online account, you'll beassigned a PIN. You should change the PIN immediately so thatyou're the only one who knows your password.

• Quicken also allows you to assign another password within thefinancial-management program. Anyone attempting to look at the datawill have to know the passwords for both your program and youraccount.

Choosing an Online Banker

When selecting a bank for your online account, look for thefollowing:

• How long has the bank been doing business? Is it insured by theFederal Deposit Insurance Corporation (FDIC), the state they'rein, or another legitimate insurer?

• If you already use a particular financial-management program,do the bank's computer programs match yours? If you needsoftware, will the institution provide it?

• What services does the bank provide? What is the monthly fee?How many free transactions are you allowed each month?

• How many checks will the bank write before passing on asurcharge? Will the bank issue paper checks for those creditorsthat don't accept electronic payments?

• How do you deposit or withdraw cash? Does the bank include anATM card or debit card? How much will it cost you?

• Does the bank also provide other services, such as investmentand financial services?

• Reliable banks provide reliable customer service. Before yousign up, contact the bank by telephone and e-mail. Can you talk toa real person on the phone? When you send an e-mail message, do youget a prompt reply?

• Study the bank's Web site. Is it well-designed and easy touse? Does it load quickly? Does it provide a demonstration of itsonline-banking program? Does it provide links to sites that coveryour other interests, such as stock-market quotes or businessnews?

If you decide to do your banking online, you may eventuallyobtain loans, trade stocks and bonds and get business advice--allat your own online branch office.

Bank On It

If you want to learn more about online banking, Internet bankingand online-banking software programs, these resources can help.

Intuit Inc. (http://www.intuit.com/ ) provideslinks to its products, Quicken, QuickBooks and TurboTax; productdemonstrations and trial versions; and services such as the QuickenFinancial Network and Quicken Financial Planner. Be sure to checkthe list at http://www.intuit.com/quicken/technical-support/quicken/faq.areas/faqs/on_bk116.htmlif you're looking for a financial institution that offersonline banking using Quicken.

Home Banking ( ) provides anoverview of banking from home featuring Microsoft Money. Alsoincluded are links to an online banking demonstration, frequentlyasked questions about online banking and other relatedinformation.

Online Banking and Financial Services Directory (http://www.orcc.com/banking.htm) includes links to many bank and credit-union Web sites. Alsoincluded are links to pages of bankers offering free banking andbill-payment software, as well as Web-banking demonstrations andbill-payment services. This site is a good place to start ifyou're looking for a bank in a particular area.

BanxQuote Online Banking (http://banx.com/banx/online/usonline.htm)provides a table of selected financial institutions and theironline services and fees.

Open Financial Exchange White Paper (http://www.intuit.com/ofx/wpaper.html) is a detailed, 15-page document discussing how financial data isexchanged using a new standard developed by Intuit, Microsoft andCheckFree. You can also browse through frequently asked questionsat http://www.intuit.com/ofx/faq.html.

Worth Visiting

Popular Science Magazine

Online Banking

http://new.popsci.com/content/com-puters/features/onlinebanking/ob.1.html

This site covers the basics of online banking.

Federal Reserve Bank of Boston

A Consumer's Guide to Payment

http://www.bos.frb.org/finance/direct.htm

Learn more about electronic payments and purchases, onlinebanking and security.

Contact Sources

Irvin Feldman, c/o Feldman and Feldman Consulting, (718)886-4102, ifeldman@compuserve.com

Eric Holmquist, c/o Hutchinson and Bloodgood LLP, 101 N. BrandBlvd., #1600, Glendale, CA 91203, EHolmquist@hbllp.com<</a>