Choosing a bank and the account services you require forms one of the major issues when you are starting a business. While you may find yourself swayed by the variances in interest rates for a number of business account packages these should not be one of your primary concerns. Of more importance when opening an account is the charges that you may receive. It is unlikely that you will have enough money in the account during the early stages to receive much interest; hence keeping the charges down is far more advisable.
If you decide to ignore this advice and look for an account with high interest the best place to look is online. Online banks; especially those just starting operations offer their business customers unbelievable deals on interest to attract and build up a large client base. If you do manage to secure high interest rates you should be wary though; it is more likely that you will receive large charges as compensation for the high interest rates.
Some who are starting a business will consider if they need a specialist account anyway. While it is not essential for those operating as a sole trader, those starting a limited company will need to sign up with a bank. Even as a sole trader however a business account will add gravitas to your business and hence make it look more professional. It also carries benefits such as ease of conducting tax returns and clarity of finances.
In addition, a business account will normally come hand in hand with an advice team. If you are starting out in business this can be especially useful, offering experience and knowledge that you would otherwise miss out on. As well as the advice, to open an account it is often the case that you will need to present the bank with a detailed business plan that sets out your objectives for the future; understandably this provides your business with added credibility as you have proven to the bank that your model is sound.
As with much of life it essential to shop around when selecting a business account; all banks have a variety of packages, all with their own benefits and downsides. Of utmost importance is to try a bank that does not control your personal finances. This is because firstly you do not want to give one bank complete control over your financial situation and secondly that it is not assured that they will be able to fulfil your business' needs, even if they do conduct your personal finances efficiently.
As previously stated the business plan forms one of the fundamental stages in opening a business account. This is not just for the bank however, by creating a detailed plan you set up certain goals for the coming years that your company should aim for. Without this kind of fore planning it is difficult to achieve success. Being a company owner is about understanding the long term picture, taking into account not only your own operations but the risk posed by competitors and market fluctuations.
Setting up an account that has charges for transactions base upon monthly or pro rata payment is also a major consideration. You must first study the type of operation you are conducting, assessing which payment method will be suitable. For instance if your business conducts a lot of cash or credit card transactions it is advisable to utilise a monthly payment scheme, conversely if your business rarely conducts transactions you should find a package that pays for each transaction separately.
While starting a company can be an extremely stressful experience finding the right account does not have to be. Take your time when selecting a package, understanding which features will most suit your operations. By doing this you increase the chances of success and will have a happy relationship with your bank manager.
Financial expert Thomas Pretty looks at the considerations that must be made when choosing a business account.