When it comes to the day-to-day running of your business, the financial product you need to be most comfortable and happy with is your business current account. You need it to be quick, convenient, flexible and, if possible, cheap. But you also want the relationship you build with your bank to be useful in the future, when you may want other products such as insurance, a business savings account, a business loan or a commercial mortgage.
The relationship you have with your bank is key. That's why your business current account choice should be based on much more than just the introductory offer or interest rate. So, check out our tips below to help you choose the perfect business current account for your specific needs.
The bank that caters for your personal finance needs may not be the most suitable for business clients, so it's important to shop around. Consider not just the interest rates, fees and charges, but also whether the bank makes you feel comfortable and if it has the infrastructure in place to support you.
Talking to the bank manager may rank up there with a visit to the dentist, but a bank that offers a dedicated small business centre or specialist manager has key advantages. Keeping in regular contact with your bank means that it will understand your business better, which, if you fall on hard times (or want to borrow money), can only count in your favour.
Lastly, you wouldn’t stay with a supplier that suddenly started charging much higher amounts or providing a worse service, so why would you stay with a bank account provider that changes on you in a negative way? Along with everything else, it might be a good idea to pencil in a banking review once a year or so, to make sure you’re still getting the most out of your chosen account.
Some banks will charge you a fee every month or quarter for banking with them. This standing charge may replace transaction charges, or it may be in addition to them. So, when comparing accounts, bear in mind how you will use the account and look at any standing charges alongside the transaction fees.
For example, if you will be making a lot of physical transactions by cash or cheque each month, an account with a standing charge but no transaction fees may be better. But if you make all your payments electronically, an account that has transaction charges but no standing charges may work out cheaper.
Transaction charges are the fees the bank charges for handling money going in (credits) and coming out (debits). These charges may be made on physical transactions, such as paying in cash or processing a cheque payment, but also for automated payments (direct debits and standing orders) – although the charges for these transactions may be cheaper.
When selecting an account, you need to weigh up the transaction charges with the standing charges (as above). You also need to think about whether you will make a lot of physical transactions or automated ones, as the charges on each may affect your decision; note that paying in by cash or cheque tends to be more expensive than making automated payments.
Aside from the obvious (shopping around to find the lowest charge), here are a few ways you may be able to minimise your transaction charges:
A lot of banks will offer new business current account customers free banking for a set period. This could significantly reduce your costs if you are a new start-up. However, while these offers may undoubtedly be cheaper in the near-term, take care when the introductory period ends. Although these introductory offers are ‘nice to have’, when selecting your account you should be thinking of more mundane things, such as the costs and charges after the introductory period ends, as well as the level of customer service.
Hopefully you're going to have some surplus cash and, while you're not using it, you will probably want to be earning some interest on it. Transferring excess funds into a contingency or expansion fund may be something you want to consider. As it will be far quicker and easier to transfer monies within a bank or banking group, you may want to check interest rates for any business savings accounts your prospective bank offers.
Online banking is a wonderful thing, and it's particularly good if you have a lot of payments coming in and going out. It can save you a journey or a phone call; you can sit in the comfort of your office or at home with a cup of coffee and manage a great deal of your financial affairs from there. With online banking, you can:
Most banks will offer online banking for free, but watch out, as some do charge for this service.
At the same time, you should still think about the practical implications of having a branch close to you – or very far away. If you run a shop, is it going to be easy to deposit the takings? When you visit the bank manager or small business team, are you going to need to take a week off just to get there? Even with internet banking and the ability to make deposits at Post Office branches (for customers of selected banks), location should still play an important part in your decision.
While you are the only one who can really know what you need out of a bank account, hopefully this guide will have given you an overview of things to consider when comparing business bank accounts. Don’t forget to find a suitable business savings account or business bond as well, to make the most of your spare cash.
Disclaimer: This information is intended solely to provide guidance and is not financial advice. Moneyfacts will not be liable for any loss arising from your use or reliance on this information. If you are in any doubt, Moneyfacts recommends you obtain independent financial advice.