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 deposit account, a business loan or a commercial mortgage.
For this reason, the relationship you have with your bank is key. Selecting your business current account is therefore based on much more than just the introductory offers or interest rate, so check out our tips below to choose the perfect business current account.
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 (such as a small business centre nearby).
Talking to the bank manager may rank up there with a visit to the dentist when it comes to how much contact you'd like to have! However, 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.
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 of 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. Paying in by cash or cheque tends to be more expensive than making automated payments, so there are a few ways you may be able to minimise your transaction charges:
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 the 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.
You don't need us 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 the ability 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, while you're not using it, you will probably want to be earning some interest on it. Transferring excess funds from your business current account into a contingency or expansion fund may be something you want to consider. Bear in mind that 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, 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 whether the bank has a small business centre nearby, the costs and charges after the introductory period ends, as well as 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.
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