How to choose a business bank account - business banking guide

   

Choosing a bank account for your small business is an important stage in the startup process. There are several key things to consider - such as transaction and borrowing costs, what facilities the bank offers, and the type of relationship you want from a bank.
Here are some suggestions which may help you decide which bank would best suit your needs.
Choosing a business bank account - tips
1. You must set up a business account if you're starting up as a limited company, partnership or any other key business structure. Sole traders can use their own personal accounts (or via a new business account - John Smith trading as XYZ).
2. Don't necessarily choose a business bank account simply because you are a personal banking customer. You may well feel more comfortable with a bank you already know personally, but they may not offer the best deal for your business.
3. Make sure you compare several business banking offerings, and compare the costs and charges associated with each one.
For example, Barclays offer up to 2 years' free banking to startups (T&Cs apply) and also include some use of CREDITFOCUS - their award-winning credit control service, free business seminars and free i-sure business data backup.
Lloyds TSB are currently offering 18 months free day-to-day banking, free Sage business planning software, a free book, 'Getting Started in Business', and a variety of start-up resources.
4. Naturally, only go for banks that have a strong background - names you will have heard of, or even internet banking brands which are owned and operated by the big players.
5. Bank Charges - a key point to consider is how much it will cost you to have a business bank account. You may have a large number of monthly transactions to process, for example, so ensure you know exactly what charges will be levied on your account before signing up. Many major banks provide "free" banking for set periods to new businesses, so this may also be of interest.
6. Online Business Banking - this is an increasingly important service, and most banks now provide an internet service so you can check the status of your account day or night. At Bytestart, and with our previous businesses, this is an essential service. Rather than ringing the bank to check if a payment has been made to your account, you can do this yourself in a fraction of the time.
7. Interest - for obvious reasons, you shouldn't hold out for great returns on your business savings income during the current economic climate, but you can certainly choose a bank which offers either free banking, or zero transaction costs.
8. Small Business Team - go for a bank which has a specialised small business banking unit. The set-up process should be simpler, and dedicated teams will be used to dealing with all types of small business and their specific needs.
Some businesses will require regular contact with their bankers, so you should go with a team you feel you can build a good personal relationship with.

Can you run your business bank account

Client can also make payments directly to you using BACS, where they literally transfer money from their account straight to yours (BACS stands for Banks Automated Clearing System). If it’s a regular payment they can set up a standing order – that’s an instruction from them to their bank to pay you an amount on a regular basis.
It is also possible to request cash from clients’ bank accounts using Direct Debits, but this can be an expensive and difficult scheme to get into, especially if you run a small business.
There will be more benefits of collecting money electronically in the near future. The UK banking industry has announced that from May 2008 a new faster payments system will be introduced, which is likely to see money paid into your account electronically actually be available the same day.
As for paying money out, all of the electronic collection methods are ways that you can pay bills without needing paper – cards, BACS, standing orders and Direct Debits. Because you are in control, it will be easier to pay your bills without ever writing a cheque… few businesses don’t offer the option of paying bills electronically.
So, that leaves just one part of the banking process firmly stuck on paper: bank statements.
Yes you can get them from your online banking system and download them to your computer.
But ironically, despite encouraging less use of paper in its own returns, HMRC prefers it if you keep paperwork. Many accountants say that if your business is ever investigated for tax or VAT, you will be better off having a stack of paper to hand over, rather than several hundred PDFs.
And that means bank statements as well. Plus you’ll find that if you are ever asked to produce a bank statement as a reference for a supplier or as proof of identity, a print off from the Internet is unlikely to be accepted.
So it seems that 90% of banking can certainly be done without paper… and as soon as someone somewhere has figured out how to replace paper statements with 100% secure digital versions, we’ll see those wiped out too.