Whether you’re starting a new business or it’s already up and running there is one thing that is guaranteed, you will need a bank account. But where exactly do you start and what should you consider? Before you even click that mouse on your search bar stop and consider what it is you need, every business is different, and the choice of financial products is as equally diverse.
As a new start up business, many traditional ‘bricks and mortar’ (that’s High Street banks) offer free banking for a set period, often up to 18 months, which means you won’t be charged for day to day banking transactions like bill payments or money paid in, after that it’s likely some sort of account fee and transaction charges will apply. Not every bank branch will have business banking advisors and depending on the size of your business will depend on how you interact with them.
Small businesses can also take advantage of the new ‘challenger banks’, they’re the ones which operate through an App or online, these banks base their services on technology rather than a branch network so all your contact with them might be via a message system rather than face-to-face or by phone. They offer basic banking services such as bill payments and electronic transfers in and out of the account which are adequate for small businesses but may not offer more specialist service like overdrafts, foreign money transfers or CHAPS payments and because they don’t have a branch network paying in cash and cheques may not be possible.
Just to make the choice a little more difficult, some banks now offer ‘free’ accounting software too which might claim to make your life easier, however you need to be able to use the software so don’t just choose a bank on this! Most software packages will work with any bank account so there’s no need to get tied up with one provider and feel you can’t move away should things not work out.
The most important thing to check is whether the bank is authorised to operate in the UK, that might sound obvious but check their registration here, if you deal with one that is not registered you may not be covered by the Financial Ombudsman Service or Financial Services Compensation Scheme if things go wrong.
Other considerations to take into account are-
- Monthly Fees
- Transaction Fees
- How to contact the bank
- Debit and / or Credit Card facilities
- Do they issue a cheque book?
- Overdraft and lending facilities
- Availability of online banking
- Number of account users you may need
- What outbound payment services are offered?
- Do you require access to foreign banking services?
Once you’ve made your wish list then shop around, don’t just go with a bank because the App looks nice or they’re offering freebies, business banking is often more difficult to move once you’re up and running so taking a few days to make a decision is the right thing to do.
So why not just use a personal account?
Personal accounts are just that, personal. Most financial institution’s terms and conditions prohibit personal accounts being used for business purposes, many will close accounts where business activity is found, and this will affect your credit rating and your ability to obtain financial products in the future.
Equally, using your own personal account for a business makes it much harder to justify genuine business income and expenditure along with giving you much more work to do when it comes to bookkeeping and accounts.
If you’re thinking of starting a business or have just started out and still not sure which direction to turn with your finances, then why not book a free discovery call with us online or call 01908 597904.