In every business, there are many things to consider. One of these is what bank you will use to run your daily transactional banking through.
You naturally want to know that your money is safe and that you can access it whenever you need to. Most bank accounts will offer you that as a minimum, but many may offer additional perks or requirements that can enable you to get what you need from your money.
Once you choose a bank, it’s often the start of a lifelong relationship. Many people stay with the same bank for years – so you want to ensure you’re with the best one for your business. This means shopping around and understanding the differences between the banks.
In this blog, we have explored the factors that you should consider when selecting your business bank account so that you can determine the right one.
- Know your business goals
- Use comparison sites
- Look into withdrawals and payments
- Focus on their local presence
- Consider alternatives
- Weigh up additional support
- Check their financial reputation
Know your business goals
The first step to identifying the perfect bank for you is knowing your business goals. If you know how much you expect to transact through the account, it will enable you to find an account that facilitates your level of activity.
For example, if you expect growing sales and profit, you will need to find an account that scales with your company and doesn’t hit you with unnecessary transactional costs. Similarly, if you are impacted by seasonality and have cash flow coming in irregularly, you need an account that doesn’t require a certain amount to be deposited each month.
By understanding what you need from your bank, in line with your business goals, you will determine what account you need and prevent yourself from being restricted. Instead, you can focus on finding one that boasts the best benefits.
Use comparison sites
Different banks will vary in many aspects, including interest rates, overdrafts, additional perks offered and fees charged. The only way to identify how they differentiate is to shop around every bank.
Comparison sites make this process simpler by listing the options and comparing their features. By using these sites, you can get an overview of multiple banks in one place and make an informed decision about which works best for you.
There are many comparison sites out there, including MoneySuperMarket and Which?, that will give specific guidance about business accounts, however they aren’t the most comprehensive in terms of coverage. If you are looking for a more personalised experience, it might also be worth talking to a financial advisor who can discuss the best options.
Look into withdrawals and payments
Next, you need to get an overview of how any bank you consider processes withdrawals and payments. Your customers will likely pay directly into your bank account, particularly if you utilise online, BACS or card payments. Your goal will be to make the purchase process as smooth as possible, which means identifying a banking system that can handle payments and doesn’t place any obstacles in the way.
Similarly, you may need to withdraw cash from your account when your business needs it, such as in a funding emergency or to pay for bills or other expenditure. It’s essential to ensure there aren’t limits on the amount of withdrawals or, if there are, that they are feasible to adhere to. This will prevent you from being subject to penalties, such as withdrawal fees, or left without funds when you need them.
Focus on their local presence
Another factor you may require for your bank is to be able to visit a local branch for your banking needs. If this is the case, you need to investigate what banks are present in your locality or if they have a relationship with a 3rd party organisation (such as the Post Office with regard to paying in or taking out money.
In the modern age, it is increasingly less required for you to visit physical banks. That being said, many people may prefer to speak to a person face-to-face when needed or depositing cheques in person. Many people also want to set up an account in person as it gives you a chance to discuss their business and needs better. Fortunately, most high street banks have branches around the UK – so it’s just a matter of finding one near you that suits your needs.
Consider alternatives
Although traditional banks tend to be the ones we spot on the high street and know by name, these aren’t the only options. The banking sector has become more diverse in recent years, with a range of agile solutions available to businesses. This includes challenger or digital banks, which have grown in popularity, with one in ten British adults switching to a digital-only account.
Even if you have always used well-known banks, you shouldn’t cast aside alternative providers. In some cases, they can offer competitive interest rates and perks that could be a perfect fit for your business. Many will also be listed on comparison sites so you can judge them against their traditional counterparts.
The only thing to be wary of is that any bank you commit to is legitimate. You can verify this by checking if it is registered with and regulated by the Financial Conduct Authority. Most reputable banks will state this on their website, usually in the footer. If they aren’t regulated by the FCA, you should question whether you should be dealing with them at all.
Weigh up additional support
Alongside their account features and interest rates, some banks may offer additional incentives if you join them. These can include money bonuses when you open an account, cashback or rewards.
Another perk that some banks can offer to businesses are schemes, such as mentoring or guidance. With these, you can access help in managing your finances alongside your account, which can be beneficial if you’re a new enterprise.
Finally, you might also consider any accounting integrations that coincide with your account. Most bank accounts now work with platforms like Xero, QuickBooks or Sage, which you are likely to use in your business. Similarly, most banks now have apps that enable you to organise your finances at any time – which could prove essential for a busy entrepreneur.
Check their financial reputation
We’ve already mentioned that your relationship with your bank could last for a long time – maybe even the entire lifespan of your business. This means you will rely on them a lot for your financial needs.
If you ever need to apply for external funding to improve cash flow or achieve growth goals, you may choose to do this through your bank. Many banks will prioritise their loan schemes for their existing customers, meaning you could stand a better chance of securing finance by taking this route.
If this is something you may need to do in the future, it’s worth looking into the financial support a bank offers before you commit to an account. Of course, they may introduce and change their lending policy over time, but if they have already have a good selection of product offerings, it’s an indicator they are committed to helping business customers.
It’s also advisable to look around at reviews or speak to other entrepreneurs about their experience with a particular bank. This helps you to understand their reputation, including how likely they are to approve you for a loan, what their repayment system is like and how they’ve assisted other ventures.
By undertaking this research, you can future-proof your bank decision for any financial needs that may emerge down the line.
Get advice
There is plenty to consider when choosing the correct bank account for your business. From overdrafts and interest rates to perks and fees, you need to find an option tailored to your needs and doesn’t make the running of your business harder.
Spend time reviewing your options, including checking comparison sites, doing research and speaking to others. By weighing up the factors, you can identify the best solution for you and commit to a bank that will serve you for years to come.
If you need support in selecting a bank account or understanding how to manage your business finances, we can help.
Our team of advisors have worked with a diverse range of businesses to help them control cash flow, secure external funding and put suitable financial measures in place. We can help you to do the same.