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Category: Business
When it comes to the day-to-day running of your business, the financial product that 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 might want other products such as insurance, a business deposit account, a business loan or a commercial mortgage.
So even more than with your personal finances, the relationship you have with your bank is key. Selecting your business current account then is about much more than just the introductory offers or interest rate, so check out the moneyfacts.co.uk guide to choosing your business current account…
A bank that caters for your personal finance needs might not be the most suitable for business clients so it's important to shop around. More than the obvious of interest rates, fees, charges, etc. it will be the bank that makes you feel comfortable, and has the infrastructure in place to support you – such as a small business centre nearby – that's going to be the best option.
Maybe talking to the bank manager ranks up there with a visit to the dentist when it comes to how much regular contact you'd like to have! However, a bank that offers a dedicated small business centre or specialist manager has key advantages. Keeping 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.
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 on top of them. So when comparing accounts look at any standing charges alongside transaction charges, as well as bearing in mind how you will use the account. For example, if you will make a lot of physical transactions – by cash or cheque – each month, an account with a standing charge but no transaction charges may be better; but, if you make all of your payments electronically, an account that has transaction charges but no standing charges might work out cheaper.
Transaction Charges are the fees the bank charges for handling money going in (credits) and money 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 will need to weigh up transaction charges with 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. Paying in by cash or cheque generally tends to be more expensive than automated payments, so there are a few ways you may be able to minimise your transaction charges:
Online banking is a wonderful thing, and 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 the office or at home with a cup of coffee and manage a great amount 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.
You don't need Kirsty and Phil to tell you that if your bank is a fair distance away from your business, you're going to need to think about the practicalities. 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 the advent of the internet and being able to make deposits at Post Office branches (for customers of selected banks) location should still play an important part in your decision.
Hopefully you're going to have some surplus cash and, whilst you're not using it, you want to be earning interest. Transferring excess funds from your business current account, into a contingency or expansion fund might be something you will want to consider. And it will be far quicker and easier to transfer monies within a bank, or banking group, than between banks – so be sure to check interest rates for any business savings accounts your prospective bank offers.
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, whilst these offers may undoubtedly be cheaper in the near term be careful when the introductory period ends. Although these introductory offers are "nice to have", when selecting your account you should be thinking of the mundane things such as whether the bank has a small business centre nearby, the costs and charges after the introductory period ends, not to mention customer service.
The last thing to say is that your bank, as well as being a provider, is also a supplier. If one of your suppliers raises their costs unjustifiably, or isn't as competitive, you'd think twice about giving them your business wouldn't you?
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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.
