How to choose a business bank account
If you are running a business you should open a separate business bank account and keep your business banking and your personal banking completely separate. If you are thinking about looking for a business bank account here are a few things to consider.
Costs
Some banks will charge a fixed monthly fee. Some charge a fee per transaction. For those that charge per transaction it may be a fixed fee per transaction or a % of the value of each transaction. Some banks charge to pay in deposits, other banks include this for free.
There are a lot of variables. Run some reports from your bookkeeping system to find the average number of transactions a month and the average value of those transactions. Armed with this data you can work out whether fixed monthly fees or per transaction fees are right for you.
Some banks will offer a period of free banking, perhaps 12 – 18 months. It’s worth factoring this in but don’t be too swayed by this freebie. If you change banks again after your free period you’ll have to change your invoice templates and contact customers who have your old bank details to ask them to pay into your new bank account. Think about whether this extra admin is worth it for the freebie.
Xero feed
Some banks have daily Xero feeds. This means that your bank transactions will automatically load into Xero every day making your bank reconciliation even easier and meaning you can keep track of your bank balance from the Xero app. If you can find a bank with a Xero feed it will make your life much easier.
Interest
Some banks will pay interest on balances that you hold with them. Head back to those reports you ran earlier from your bookkeeping system and see what your average balance is and how much interest you could be earning.
Linked savings accounts
Connected to this, does your bank let you open a linked savings account? It’s a good idea to get into the routine of putting aside some savings so that your tax bill doesn’t come as an unpleasant shock or to meet large supplier payments.
App
Does your bank offer a user friendly app? What are the reviews like? Do you need to be able to make payments via the app while you are on the go? How easy is it to do?
Dual controls
Ideally you want to have dual controls over payments, this is a key control against the risk of fraud. You might want someone else in your team to load payment runs but keep the option for you to approve all payments.
Overdraft
Do you need an occasional overdraft to manage cash peaks and troughs? If so then you need to know the costs of the overdraft.
Number of cards
How many debit cards do you need for your staff? Does the bank charge per card or are they included?
Forex
Does your business operate solely in Sterling or do you need a bank which can support you with Dollars, Euros, or other currencies?
Reviews
We all know that customer service can be quite variable. Ask around and see what other people say. Everyone’s needs will be a little bit different but if you know someone who had a bad experience with a particular bank then find out why they had a bad experience.
There are plenty of banks to choose from. Our advice is to do your research and pick the one that’s right for you.