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5 tips for successful business banking

5 tips for business banking image

Having an in-depth knowledge of your business account, along with the facilities offered by your bank or building society, will mean that you will get the most out of your business banking.

If you are a new business, start-up or sole trader looking to establish yourself, having a business account will inevitably help you manage your finances, as well as track your progress when it comes to revenue and profits. Getting used to business banking best practice and accessing your business account online will help you in managing your money, especially if you have limited experience of bookkeeping and accounting.

We’ve put together 5 tips for business banking that should help you get the most out of your business account and allow you to avoid any pitfalls along the way.

1.Choose the best introductory offer

When picking out your first business bank account, you will find there are many introductory offers to take advantage of, which will also help you compare accounts and find the one that is best for you.

They mainly consist of offering a period of free business banking, meaning that you will not have to pay a monthly maintenance fee. Introductory offers on current business accounts extend to around 25 months depending on which provider you choose, which means you can avoid these additional fees while your new business is being established.

Some introductory offers will also exempt you from transaction fees too, meaning that depositing money via cash cheque or electronically is completely free. If you can shop around for the best introductory offer, you could find yourself avoiding expensive fees so you can concentrate on making profit in your first few years of business.

Lastly, you might even find your business account will offer a cashback bonus for a short time, or on a permanent basis. As a start-up business this can really help offset any additional charges you might get with the account, or it might even cover additional expenses you will need to make in the first year of opening.

2.Know your business banking fees and charges

The first important aspect of business banking is to gain an understanding of the fees involved with having a business account. They are usually to do with money entering or leaving the account, as well as more specialised transactions such as non-sterling and CHAPS payments (Clearing House Automated Payment System).

The following fees will usually apply to those who have taken out a new business account:

  • Application fee – some business accounts will ask for a one-off application fee upon opening the account
  • Monthly maintenance fees – simply the fee that you’re required to pay as the owner of the account. Usually taken on a monthly or annual basis
  • Transaction fees – payments using debit card or online, usually going out electronically through direct debit, standing order, transfer or otherwise
  • Non-standard transaction fees – your provider will charge a fee for handling a non-standard transaction such as foreign currency or a CHAPS payment
  • Deposit fees – your bank or building society will charge you for depositing funds electronically, by cash or by cheque. Depending on the terms of your account the electronic deposit is often free, whilst cash or cheque deposits get cheaper the more you deposit
  • ATM withdrawal fees – like credit cards, your business account provider can charge you for withdrawing cash via an ATM or from a local branch
  • Overdraft fees – you will almost always be charged a fee for using an overdraft facility, but these fees will be less if it is an arranged overdraft

Depending on the terms of your business account, you can change the way you go about business banking and choosing a business account to suit you. For instance, if your customers usually pay by card, it makes sense to have a business account where it’s free to make electronic deposits into the account.

3.Speak to your business manager

It can be daunting enough to start your own business, not least make financial decisions and manage your money so you don’t end up spending too much all at once. That’s why you should seek out advice where you can, with one of the best resources being your bank or building society.

With any major provider you’re likely to be assigned a business manager, who you can contact whenever you need advice. You can even use this point of contact to raise an issue with your business account if one crops up. Developing a working relationship with your business manager can make it easier for you to get quick advice, and to resolve issues you might have.

Having this support can really help for sole traders and start-ups who might have a knowledge of their own industry or craft, but not business banking. Even if you’ve opted for an app-based business account that hasn’t got any local branches, you can still make use of the online and telephone support too.

4.Make use of additional features

Once your new business has been setup and has started trading, you will slowly get used to the way your business accounts work, with (hopefully) adequate support from your provider. Once you’ve settled in to managing your business finances, you might want to start using additional features to full effect.

Overdraft

You may already have experience of a current account overdraft if you have previously overspent. A business account overdraft can be used in a similar way, but more like a safety net if you have a few big expenses to make within a couple of days. The biggest difference is usually the amount, as some providers allow you to have an overdraft of up to £25,000, subject to status.

Dipping into your overdraft can help you in the short-term, but it’s worth looking up the associated fees to see how much it could cost you to use. 

Savings

Another option for business owners who have built up a certain amount of profit is to move some of it into a savings account. This is better than it not earning any interest at all, and makes sense if a chunk of money isn’t being used for a while for it to earn interest instead.

Not all providers have a savings account option, so it’s worth browsing through business accounts to see which one might be right for you. Alternatively, you could seek out a separate savings account with another provider, especially if you can find a better rate of interest that will allow you to earn more.

Bookkeeping

Depending on which business account provider you opt for, you might even have access to online or mobile banking, where you can easily track your income and expenses, amongst many other things. App-based banks will often tout their mobile banking as one of their biggest advantages over competitors, which will definitely come in handy for new business owners.

Some of these providers will also allow you to link your business account with a piece of accounting software such as Sage, Xero or FreeAgent, making it even easier to manage your finances.

5.Know when to make the business account switch

After using your business account for the first few months, you will get used to the ease of access, additional features and level of support you will receive from the provider you have chosen. Also, you might get to see aspects of using the account that you don’t like as much, such as transaction fees and other charges that you might have to pay.

Making the switch to another business account is one way of making the most of introductory offers or switch incentives, and is also as easy as switching a current account, thanks to the Current Account Switching Service (CASS).

The time to switch is usually in the following circumstances:

  • Introductory offer has finished – this means you’ll have to start paying fees and it’ll
  • Change of circumstances - receiving more card payments than cash, for example, which means you will have to pay more in fees
  • Switch incentive – if another bank is offering a particularly good switch incentive for moving over, this can often a good reason to switch accounts
  • Recommendation – a colleague has recommended another provider that can serve you more as a business
  • App-based business account – these challenger banks are also tempting customers by offering improved mobile banking

Compare business accounts

Now that you have our top tips for business banking you can choose the right account for you and hopefully get the right introductory offer too.

Feel free to browse our business accounts or read the following articles to gain further insights on choosing a business account:

Robert Bester

Updated on 5th November 2019