When you choose a bank for your business you’ll need to consider their services and charges – and whether you set it up a separate business account. It’s important to choose the right option for your business needs. A sympathetic bank can go a long way to easing you through any problems you may encounter.
Some sole traders use their personal bank account for their business, making full use of any perks available with these accounts. This approach isn’t for everyone. You may find having a separate dedicated account makes it far easier when it comes to record keeping.
The most basic account will offer a cheque and paying-in book. Many banks will offer extras to startups like free banking or interest on in-credit balances so it is worth shopping around. Here are some of the common services available.
A current account is probably the most important account you will have, as it enables you to make all the day-to-day banking transactions that you need to for your business.
You can pay in money whenever you want and set up standing orders and direct debits to cover any monthly expenses, such as your mortgage or rent, utility bills, council tax, and any other regular outgoings. You can also go overdrawn if you don’t have sufficient funds to pay these expenses (depending on the type of bank and account). You should always agree this in advance with your bank, as fees for unauthorised borrowing are much higher than for authorised overdrafts. It is a legal requirement for a company to have its own bank account.
There may be a notice period you need to provide to make withdrawals. If you don’t give the required notice you could be penalised, usually by a loss of interest. No notice deposit accounts (also known as instant or easy access accounts) are suitable if you want to avoid being penalised for making unscheduled withdrawals.
Instead of employees having to submit expense claims to recoup their own money, a business credit card can allow them to pay without the hassle. Alternatively, a business credit card can help a self-employed or small business owner to manage their monthly cash flow in addition to using their overdraft. Where possible, the balance should be repaid as soon as possible where interest is chargeable as the interest on credit cards can be extremely high.
It varies. Many banks offer a free banking period, usually between 12 and 18 months to encourage businesses to use their services. Most accounts usually have a monthly fee plus a variable charge for different types of activity. Other accounts charge a higher fixed fee per month but the variable charges are lower and in some cases nil. It is recommended to look around and see which bank account suits your business. As your business grows, it is likely you will need to revise your account to ensure it is still working for you.
How should I choose a bank?
When choosing a bank the following checklist should be useful.