Choosing the best business bank account is not a process to be rushed. It may seem like a nuisance but weighing up the benefits of each current account could save you money in the long run. You wouldn’t buy a car from a dealership without comparing the facts and prices would you?
Business Bank Accounts – The Definition
This is neither a private or personal account. It is an account tailored to businesses. A business bank account enables business owners to keep an eye on their expenses and cash flow without getting mixed up with their personal finances.
There are also a range of services that can be offered to your business through business bank accounts such as:
- Zero monthly fees
- Credit or Debit Business Cards
- Automatic categorisation of expenses
- Investment and Loan options
- Bookkeeping services
- Payroll services
- Account management services
- Budgeting services
- Higher deposit limits
- Account alerts
- Interest payments
- Liability protection
These are just a mere handful of business banking features that you can access as a small organisation or start up.
Why do I need a Business Bank Account?
Although it is not a legal requirement to own a business account as a sole trader in the UK, it is extremely advisable to do so.
1. Terms and Conditions
If you are a startup in the UK and are not yet seeing high levels of income, it may seem simpler to have all your transactions in one place. However, once you start to grow your business, the bank will become suspicious of accelerating cash flow into your bank account. They will then be well within their rights to instruct you to open a separate business account.
2. No Mistakes
Keeping your accounts separate will prevent you from getting your lines crossed in regards to handling your expenses and filling our tax returns for HMRC accurately. Mistakes can be easily made if you are mixing your personal finances with your business ones. Setting up a business bank account can help you to avoid those consequences.
3. Be Professional
I think we can all agree that transactions between yourself and your customers will appear more professional if you are using a business bank account. Your account will be in the name of your company, rather than yourself. There will be clients out there that feel more comfortable making payments to official business accounts.
Therefore, whether you are a sole trader with the option, or a limited company with the legal obligation to own a business account, it will benefit your business in the long run. But the question is, how do you go about finding the most suitable one for your business needs?
How do I find the Best Business Bank Account?
As a business start up, this may seem like the most daunting part. There are a variety of banks and banking options out there that you could go for. Nevertheless, it is important to choose a business bank account that not only can offer you specialist support and advice, but also meet your needs as a business.
There is nothing worse than an account manager who does not understand the needs of your company. You want a bank with a wealth of industry knowledge that can build a relationship with your business. Here are some main points to consider when seeking the best business bank account:
Many places like to give back to those that choose to bank with them. Especially considering most businesses are likely to open an account with a bank they are already familiar with. By branching out and exploring your other options, you may come across accounts that provide an initial period of costless banking to start ups, whereby you won’t have to pay any charges for the first 12 to 18 months. Alternatively, you may also be offered discounted fees as a new business if you are looking to switch banks.
Monthly Charges and Fees
Once the introductory phase is over, businesses will be required to pay a standard charge per month to run their business account. These monthly fees can vary in terms of benefits and services that are offered. Some business accounts are tailored by banks to support startups by providing lower rates. Small charges for everyday banking such as withdrawing cash, banking cheques or receiving payment via card need to also be contemplated. As a business, you may not be able to afford such high tariffs, so it is worth comparing what you are most likely to meet the expense of.
Despite the fact that several banking websites will offer 0% of interest onto your business current account, there are a handful of branches that will offer you more. It is a case of searching for those current accounts that will give 0.1%-0.25% AER. Furthermore, it is worth noting that a business savings account can also receive up to 1.75% AER within agreed terms and conditions.
Customer Service and Support
It is also important to consider how much support you are going to require as a business from the bank. For example, if you do not need much support, you will be able to go for a cheaper option of online banking only. Afterall, as a start up you are likely to need basic support in terms of day-to-day banking.
On the other hand, in-branch banking may be necessary if you will be depositing cash on a daily basis. In this case, you will be in need of a high street bank in which you can easily access for face-to-face consultations and cashing cheques in etc.
Therefore, you need to find out exactly what services a bank will provide you with. Important factors include:
1. Service Quality – Has the bank been awarded or commended for their service quality?
2. Account Management – There are a range of banking services that will offer account management services so you can get on with the daily running of your start up.
3. Overdrafts – The availability of an overdraft facility can prove incredibly helpful to businesses. So check this is offered!
4. Online Services – Does your bank have any digital offerings e.g. a mobile app service to easily access your transactions and current balance? Are there any special features that make the app useful?
5. In-branch Services – If your business handles cash and cheques only, you will need a bank that can handle this requirement. Digital banks will not offer this.
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