Customer paying at till for item from a small business

Contents

  1. 1. Why you need a business bank account for your small business
  2. 2. What to look for when picking a business bank account
  3. 3. Prepare for success with the perfect business bank account

What to look for when picking a business bank

October 6, 2021
But not all accounts are created equal. Each offers its own advantages and drawbacks. If you want an account that helps you achieve your professional objectives, you need to know what to look for.In this article, we’ll share why you need a business bank account and the factors you should consider when weighing your options.

Why you need a business bank account for your small business

A business bank account keeps your business transactions separate from your personal finances. Here are a few reasons why setting one up is a great idea:
    It’s essential for building separate business credit and acquiring small business loans. It protects your business credit score from any negative effects of personal loans and debt.Running transactions through a separate business account gives you credibility with customers and suppliers, as it implies you are a trustworthy and competent organisation. When you track business spending and income separately, your bookkeeping and tax preparation run more smoothly.
When it comes to setting up an account, different banks offer different benefits. Some will be more important to you than others, depending on your needs and goals, so take the time to properly research your options.

What to look for when picking a business bank account

Every bank account comes with various features, benefits and costs. As you sort through your options, plan for both your current business needs and future growth. Ask yourself whether the account features that work today will also support the business you envision five or ten years down the road.To be sure the account you choose fits your business strategy, consider the following criteria as you search.

1. Is the bank or financial institution FCA approved?

Financial service providers must be authorised by the Financial Conduct Authority, which oversees all UK financial services and helps to protect monetary interests.In other words, FCA authorisation guarantees that an account provider is competent. It shows that they adhere to market conduct standards and that they act ethically. And it’s an indication that the provider is creditworthy and financially sound. Finding an account that’s already approved spares you the time needed to research all these details. When your bank is FCA approved, you can rest assured that your interests are protected and your money is in good hands. You can learn more and verify that your business bank account provider is approved on the FCA’s website.

2. What features and services does the bank account offer?

Banks offer many services that make business easier and more efficient. Decide which features matter to you and choose an account provider that can support them.To determine what you need, think about how you access your account and make and accept payments. Then, look for features that support the way you do business now or plan to in the future. For example, you may want a bank that offers:
    Online and mobile capabilitiesBill-pay servicesInternational paymentsPayroll servicesConvenient branch or ATM locationsBusiness debit card accessPaperless banking
Knowing the features you need upfront sets you up for success. It eliminates potential transaction problems before they occur, and choosing the right options makes it easier to manage and grow your business.

3. Will it integrate with the right accounting software?

Most small businesses use accounting software to simplify bookkeeping and tax preparation. But did you know it can also add value in helping you manage your business banking information? The key is to choose an account that’s compatible with the tools you already use.Manually transferring data every week or month can eat up precious time and leave you prone to accounting errors. Proper integration means banking transactions sync with your record-keeping, saving you from hours of manual entry and double-checking the accuracy.Integration can also support accounting tasks aside from tracking deposits and withdrawals, like automating payments to suppliers.Finding an account that syncs with your current software, or software you plan to use in the future, can save you both time and money. It’s a quick way to streamline your business and step up your accounting game.

4. What fee structures apply?

As with personal accounts, business accounts may have a variety of fees attached to them. Those fees can add up if you’re not clear on the costs in advance. Common fees include:
    Account maintenance feesDeposit or withdrawal feesATM transaction feesMinimum balance feesInactive account feesOverdrafts fees
In addition, be sure you read the fine print to uncover any hidden fees. These may be things like a monthly account fee on top of transaction fees or limits to the number of free transactions you’re allowed per month. To avoid any costly surprises down the road, the best practice is to spend time researching and also ask about the fees in advance.

5. Does it offer incentives—and are they worth it?

Many banking providers offer incentives for choosing their services, often in the form of cashback bonuses or no fees for the first year. Some of these incentives can help you reach your business goals. For example, rewards for maintaining a minimum balance over time can help you develop good saving and spending habits. Keeping a steady balance promotes more conscientious spending. And, it can make you more attractive to lenders when you’re ready to apply for a business loan.Other incentives, however, can seem great in the short term but may result in costs later. For instance, if your business grows, do your fees follow suit? Is the fee waiver for the first year enough to offset the costs of fees that accrue afterwards?Incentives must align with your business needs to be worthwhile. So make sure you read up on the terms and conditions before committing.

6. Are there transaction limits?

Know what limitations your account imposes. A growing small business can make lots of deposits, transfers, payments and withdrawals in a given month. Some banks may put a limit on one or more of these activities, which can impact your cash flow.Suppose you exceed the number of allowed transfers in a month. You may be fined or, possibly worse, have your account frozen. You don’t want to end up with blocked payments due to an unexpected restriction.Check with your provider on any limitations. Make sure the account is a good fit for your typical cash flow so you don’t end up piling on more fees or frustrating customers.

Prepare for success with the perfect business bank account

Choosing the right bank account and the right bank can have a significant impact on the future of your business. Researching the best options can be a long process, but it’s worth the extra effort.An account that fits your needs can help you streamline processes and reach your goals more easily, all while boosting credibility among buyers, suppliers, partners and customers. 
Caroline Wire
Caroline WireFreelance Copywriter

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