Are you having trouble choosing a small business bank account?
For sole traders, using a dedicated business account isn’t strictly necessary. That said, having one makes record-keeping much simpler.
It also helps you deal with larger sums and can really make your life easier if HMRC ever selects your tax return for an in-depth inquiry.
Better yet, many businesses can take advantage of great extras and reward schemes.
When it comes to choosing a small business bank account, make sure you look out for these key features:
Free banking period
Banks understand they have to work hard in order to attract new customers, and one of the easiest ways of doing this is offering a period of free banking.
This means you won’t be charged an annual fee or fees on transfers. It’s a great way to save a little bit of cash during your first year or so.
Period lengths differ, but many banks offer a cost-free account for up to two years. RBS, for example, currently offers a small business bank account that delivers 24 months’ free business banking and no annual fee on your business credit card for the first 12 months.
While the initial free banking period is nice, what’s more important is what kind of fees you’re going to be stuck with once that period runs out.
Make sure you don’t fall for an attractive first couple of years without checking how things will shape up further down the line.
Some banks levy monthly account fees, while others will charge for cheques and cash paid in. Generally speaking, you’ll pay fewer charges if you mostly work through online banking.
When you’re looking at fees, think about the kind of business you have, how frequently transactions are made and how often you’ll need to visit a branch.
An interest-free overdraft is not something you should rely on, but it’s nice to have a little cushion to prevent any obnoxious and easily-avoidable charges.
Many small businesses, usually sole traders, will simply transfer money from their business account to their personal account as soon as it comes in, leaving little or nothing in the business account.
If they then get a small charge on their business account which takes them into their overdraft, they might end up paying a relatively large fine. Natwest, for example, will charge £50 on overdrafts between £0-500.
A professional card
This might seem like a superficial concern, but it makes sense to check out how the debit or credit card associated with your chosen bank account will look.
This won’t be a big deal if you never really use the card, but if you like to pay for client lunches or other expenses, it sends the wrong impression to whip out a card that doesn’t look the part.
It might not be a major consideration, but it’s worth keeping in mind when choosing a small business bank account.
Choosing a small business bank account – a summary
Choosing a small business bank account can be a headache, but it’s worth investing a bit of time into to get the best deal.
Weigh up a few different options and keep these key features in mind. Make sure you’re aware of any charges associated with the account before making your decision.