Choosing and using a business banking account

Managing the financial aspects of your business is key to success. A business banking service that you can rely on and trust can save you time and money.

This guide looks at:

• Why business banking matters
• Basic business banking services
• Additional banking services

Why business banking matters

For small businesses, time pressures may make it more difficult to bank efficiently. But without a firm grip on your finances, it can be difficult to see how profitable you are, to get an instant picture of your cashflow situation, or to maintain the records you need for your year-end returns.

Poor financial management can have a direct impact on your bottom line if, for instance, you waste money by:

• Going overdrawn unnecessarily due to banking cheques late.
• Incurring charges for late payment to suppliers.
• Missing out on discounts available for making bulk, or automatic transactions.

A solid banking partner can help you manage your finances better and avoid such unnecessary expenses.

Basic business banking services

Banks provide a number of services which can help you manage your business finances more effectively, such as:

• Telephone banking
• Internet banking
• Payment cards
• Charge cards
• Automated payments
• In-branch deposit boxes

Telephone banking

Telephone banking allows you to make money transfers and bill payments, check your account balance and order statements, out of hours, seven days a week.

You can nominate colleagues as users and decide their level of access. Each authorised user gets a membership number and an individual password, so you can track activity accurately and ensure security.

Internet banking

To keep control of your cashflow, Internet banking can prove invaluable. You can use it 24 hours a day, 365 days a year, to transfer funds between current and deposit accounts and view loan accounts. You can also monitor incoming payments and pay bills, and avoid having to make trips to your local branch.

Business Debit cards

These work like a personal debit card, with payments coming from the business account. They are a quick and easy way to pay for everyday expenses.

There’s no need for a cheque book and payment cards cost less than writing a cheque. You can use yours in person, by phone, post or online, as well as to withdraw up to £700 cash from ATM machines.

Using the card can also help reduce the need for petty cash as you can choose which members of staff have a card - up to 4 cards per account. Statements show details of each transaction, so keeping track of business expenses is straightforward.

Charge cards

Charge cards allow you and/or designated members of staff to pay for everyday expenses on a short-term credit basis with pre-agreed credit limits. The balance should then be paid off, in full, by direct debit each month.

A key benefit of these cards is that you have control over how much each cardholder can spend. Such cards can be particularly useful for managing business expenses, which can often be time-consuming and cumbersome to administer.

Charge cards are offered subject to status, and you may have to pay an annual fee.

Automated payments

If you make a large number of credit or debit payments it can be more cost-effective for you to make automated payments by phone, fax or PC.

While there may be a set-up fee for some services, the discount for making bulk payments should reduce your banking charges considerably.

In-branch deposit boxes

Cheques and cash can be put in an envelope and deposited in a secure box within the branch. Staff will check and process your transaction by the end of that working day and commercial envelopes are available for bulkier transactions. There may be a charge for this service.

Additional business banking services

Along with the many services to enhance your day-to-day business banking, your bank may provide additional services which could help simplify your business’ finances, including fully-managed payroll and a card payment system.

Fully-managed payroll 

This service can be tailored to businesses with fewer than 50 employees, at a fixed cost, to:

• Tackle the year-end paperwork (P60s, P35s etc.).
• Generate payslips.
• Deal with employee PAYE queries.

Card payment system

Your bank can supply point-of-sale terminals enabling you to accept payments by debit and credit cards. After the set-up fees and service charges, these services can help minimise your paperwork and simplify accounting. By taking payments close to the time, you can help to improve your cashflow and reduce your debtor period.