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If you’re contemplating opening a business bank account, take some time to consider what they offer. Picking the right account could be a real boost to your business.
Opening a business bank account is not necessarily as easy as you might expect with plenty of opportunities for the sector to improve. Challenger banks are however entering the sector causing a wave of innovation, which we hope will lead to better customer experiences, improved functionality and hopefully ultimately more flexibility and support facilities.
What do you want from a business bank account?
Before starting your search, think about what you want from your account. This helps you to filter out the ones not right for you. You should consider the following:
- Do you want business support, perhaps face-to-face from a local branch?
- Do you need a local branch for depositing cash?
- What type of transactions will you be making? Will they be numerous?
- Is telephone banking important?
- Should your bank be able to connect to your accounting software?
- What online facilities do they have?
- Will you need to manage transactions in foreign currencies?
- Do you need additional services such as invoicing, payroll and credit checks?
Your business will hopefully grow and evolve over time so when considering your business account think about both your current needs and what you want in the future so that your business account becomes a business asset. Believe us, it isn’t an easy process to change your bank account and bank details, with customers taking time to update your details on their system; you don’t want to do this unless you have to.
What should you be aware of when opening a business bank account?
Along with services that banks provide, you should also consider the charges they may incur, together with any other costs, such as:
- Monthly account fees, including those after free periods of banking
- Transaction charges
- Overdraft costs
- Cost of international payments
- Minimum balance requirements
- Interest rates, looking for the best return
- Account perks such as gift cards or lower insurance rates. Do you really need these?
Have you considered all the options?
Banking is changing, following regulators’ moves to bring more competition to the sector and the boom in fintech which has introduced new online-only banking platforms, so there are choices beyond the High Street banks, AKA the Challenger Banks. For example, CountingUp, Monzo, Revolut, Starling and Tide are used by our clients and there are many other choices.
Online banks tend to have lower overhead costs and can offer cheaper fees and better interest rates. Also, being 100% focused on their online offering, you will find these banks slick and efficient, offering a breadth of online functionality making transactions and tracking your finances incredibly easy, they are not held back by archaic and colossal architecture and infrastructure which may no longer be fit for purpose. Starting with a blank sheet of paper does have it’s advantages when it comes to meeting customers current and future needs.
Despite this, only 26% of Small and Medium Enterprises (‘SMEs’) would go to a ‘digital-only’ alternative, even if it were cheaper, according to an Accenture survey, partly due to security concerns. However, customers are steadily becoming more comfortable with online banking and this is reinforced by the fact that the traditional banks themselves are racing to enhance their online offerings to complete with online challengers. Whilst they are innovative however, some of these accounts are in ‘beta’ testing, for example not having the ability to make transfers abroad, only providing personal/business banking, but not necessarily both yet. This might have put off other potential customers, until these are addressed.
How do I choose a bank account?
Shop around; it’s worth considering both the high street and online banking options and taking time to compare their offerings against your list of what you need from a bank account.
Starting a business account is important. Apart from avoiding possible problems with HMRC by clearly separating personal and business expenses and transactions, a business bank account with great functionality can help you take control of your finances.
Whilst innovation is improving the sector, banking for start-ups and Small and Medium sized enterprises in the UK is not best in class. The three simple things we’d look at in deciding currently would be:
- What functionality do you require both now and in the future?;
- Who offers the longest interest/charge-free period; and/or
- Who do you already have an existing relationship with. You’d be surprised, it isn’t always easy to open a business bank account.
Specialists in business support: Black and White Accounting
If you would like to discuss business banking or any other business challenges you face and how they may impact on your finances in 2020, our specialist team can help you, contact Black and White Chartered Certified Accountants today or call us on 0800 140 4644.
