Finding the right banking option could make or break your business. You need to make sure you invest the necessary time to choosing the right bank and the right accounts to suit your business needs. This guide will help you consider which option is the best for you.
What is your business structure?
If you are the sole proprietor of you business you could simply have all cheques addressed to you personally. Some banks require you to have a separate business account, it can also be risky to combine your personal and business finances since you need to be able to show all your business activities in case of auditing or assessment.
If you are operating as a partnership you will need a business account unless you are an informal partner, in which case you can use a personal account or a business account.
If you will be running any type of company you will need a business account. This allows for payments to be made under you company name. Having a business account separated your personal finances from your business finances. Everything you do in business has to be identifiable and transparent for audit purposes, so separating you business transactions from your personal ones keeps things clear.
Finding the right account
You may decide to go with your current account provider as you have already built up a good relationship with the bank however it is strongly advisable that you shop around when opening a business account because:
• Banks offer a variety of business bank account options with various associated costs and levels of support.
• Having your business account with a different bank to your personal account ensures that one bank doesn’t have total control of your finances
• A bank that you do not already bank with might be prepared to offer you a better deal
• Please note that while the services offered by a bank may differ they all have to comply with the Financial Services Authority (FSA) Banking regime.
Here are a few key questions to ask when considering which account is for you. You may wish to set up a spread sheet with all the answers to help you find the right account.
1. What charges are there and how are they made?
2. Does the bank offer online/telephone banking?
3. What support is there for small businesses and start ups?
4. What business services are there?
5. How much do the business services cost?
6. Will you have access to a local branch and a local relationship manager?
7. Are there any special offers for new customers or new businesses?
Here is a quick description of the different accounts you may need.
If you business is going to be accepting debit or credit card payments then you will need to have a merchant account. This will allow you to process those transactions.
This can be used for you day to day transactions, payments and receipts. You may be able to find a bank which pays interest on your current account credit balances.
Instant Access Deposit Account
This account can be used for sums of money which are not required for day to day operations. You still have access to funds when you need them.
Term Deposit Account
This account is for longer term savings. Interest rates are likely to be higher on this type of account. It should be used for money that is not needed for daily operations, and that you are confident you will not need for the term of the account, as you may be unable to access the money or incur penalties or charges if you access it without proper notice.
Foreign currency account
If you are going to be trading overseas, and will need to make or receives payments in a foreign currency, it would be beneficial for you to have this type of account.
If you are going to be taking out a loan for investment into your business then you can open a loan account.