How to select the right business bank account
November 19, 2015
Selecting the right business deposit account for the needs of your new business is one of the more enjoyable tasks of starting up!
Whatever kind of business you go for, a limited company, partnership or to operate as a sole trader, you must have a separate, designated business account. It’s a legal requirement for limited companies and highly recommended for sole traders (to keep personal and business financial activities separate).
We suggest you also open a business deposit account.You can put cash aside for tax and VAT payments, and you will earn a far better rate of interest than if your money is sitting in your current account.
You may have a long-standing relationship with a particular bank as a personal customer, but it doesn’t necessarily follow that they will also be the best bank for you as a business client. You know what they say about familiarity breeding contempt! Go window shopping, or better, internet shopping, and make sure you compare several business accounts before deciding.
Find out how much it will cost you to have an account with a particular bank. If you have a regular batch of monthly transactions to process, you’ll want to know what these will cost to carry out. Equally, are any banks offering any cut-cost incentives for business starters? Generally speaking, though, it’s best to look at what is offered in the long run, not the initial incentives.
Some banks offer free banking for life, but the support offered is minimal (sometimes customer aren’t even allowed to deal with humans in branches; only cash machines). Others do charge monthly fees, but it’s easy for you to speak to a human. You need to weigh up your needs against the cost.
One particularly sore point between banks and their clients is interest earned on money in accounts. Things do seem to have improved across the board on this score in recent years, but there is a big spread of what is offered by the major players.
It’s quite common that you either get free transactions or a good rate of interest, rarely both. So it’s up to you which you’d prefer. Most start-ups will benefit more from lower charges in the first few years of operation when they don’t have a lot of surplus money. You can always switch banks later.
You will need to consider what your chosen bank offers for internet banking. Many new business owners find themselves doing financial activities in the evenings or at weekends. So can you get full access to statements and your accounts no matter what the time or day? A good online banking system can save you a lot of time – and when you’re setting up a business, time is sure to be one of your most precious commodities.
If you still prefer the personal touch, find out which banks have a designated team for taking care of small business customers. They will make the whole set-up process a lot easier, quicker and painless and there should be someone there to help you with a problem at any time. Banks have no qualms in making money out of our money, so it makes sense to get your monies’ worth when the opportunity arises!