A business bank account ensures your finances remain separate from your personal spending. Limited companies and limited liability partnerships must have a business bank account. Even if you’re a sole trader or in an ordinary partnership, it’s a good idea, because it helps to:
keep track of business income and spending
manage your cashflow
simplify your tax returns
build a credit rating for your business
access business-specific finance.
Choosing the best bank account will depend on your type of business. Considerations may include fees, integration with accounting software like Xero, and interest rates on your business savings. There are a lot of things to think about – here are a few:
Business vs personal accounts. Business bank accounts easily handle more transactions than personal accounts. They will typically include features such as overdraft facilities and business credit cards. Having a business bank account will also help you access business loans.
Your business’s financial requirements. Whether you’re just starting out or have been in business for years, you need to assess your needs. Important factors may include transaction volume, your financial goals and long-term plans. As a business start-up you may prioritise low-cost banking. If your business is growing, you may want to choose a bank that can support you in the longer term. For example, you may want easy processes to handle international transactions.
Transaction types. The pattern of your business transactions is important. You may deal with a lot of low value transactions every day or have irregular high value income and expenditure. It’s important to know if fees and timescales will affect your business processes. Are you happy to monitor and manage income and expenditure yourself or do you need support for complex business transactions?
Terms and deals. Some banks reduce charges or offer free banking for new customers and start-up businesses. This can help to reduce your costs, but it’s worth understanding what will happen after the introductory period. This could make a big difference to your business, and it could affect your choice of bank account. Ask about minimum balances, transaction and account fees and charges if you overdraw on your account. You may have to pay monthly fees or transaction fees, although some banks only charge for additional services. Some may also limit cash deposits and transactions over specified periods.
Online and mobile banking. Many banks have closed High Street branches in favour of online banking and apps. You can save a lot of time by managing your business finances on the go. In many cases you can see balances and manage payments at any time and from anywhere. However, check customer reviews to see which are easy to use and backed up by reliable customer support. Ideally, you should be able to speak with a knowledgeable representative when you need to.
Savings. If you have a surplus in your business, even for short periods, you could earn interest with business savings facilities. Enquire about instant access savings for flexibility or higher-interest accounts with longer notice periods for withdrawals.
Rewards. Like other businesses, customer retention is important for banks. To maintain customer loyalty, some banks offer cashback on bill payments, good interest when your account is in credit, or travel insurance, for example. If you’re looking for a long-term banking partner these rewards may help you make your choice.
Shared values. Like your other business partners, your bank can support you and help you grow. It’s important you feel they share your values and will deal with you fairly.
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