One of the biggest decisions any small business owner faces is choosing which institution will handle their business banking requirements. It’s important to ensure that personal and business banking is kept separate where possible, as this increases transparency in your business transactions and makes reporting easier at tax time.
Here are eight important points you should consider when choosing your bank:
1. Transactional accounts
There are multiple different transactional products available, so the key is to work out what you need for your business before you make your decision:
You will need a transactional account for your business, as this is the account that you’ll use frequently to manage your cashflow. Before choosing a transactional account for your business, you will need to identify what facilities and options you want attached to your account. These will include;
- Internet banking
- ATM access
- EFTPOS access
- Branch access
- Cheque book
- Overdraft
- Payroll processing facilities
- Interest bearing
- Lockbox services.
2. Interest bearing vs low fees
Many small business owners look for business accounts that earn interest on any money they leave sitting in there. Unfortunately, many interest-bearing accounts also charge higher than average account fees and they may also limit the number of transactions allowed in a given month.
Your business’ primary transaction account shouldn’t limit how many transactions you’re able to make. Likewise, you’ll find that keeping your banking fees to a bare minimum will save your business money, rather than focusing on earning a few extra dollars in potential interest.
However, there are times when it might make sense to aim at an interest-bearing account. For example, you might be diligent enough to keep two separate business accounts running. One might be for daily transactional purposes that doesn’t earn anything in interest at all. The other account might be for you to keep payments such as GST or BAS or PAYE payments aside and separated from the operating account. In this case, those separated payments can sometimes end up sitting there for months until the payment is actually due. As this account isn’t likely to see a lot of transactions happening, you might want to consider earning a bit of extra interest on those funds.
3. Merchant facilities
Offering your customers the ability to pay for their transactions at the point of sale using a credit card or debit card can help to increase revenue and improve cashflow. You may also offer customers the option of paying for their purchases over the internet or over the phone by credit card. This is when you’ll need a merchant facility in order to let you process those payments.
Before choosing a merchant facility, be honest about the volume of credit card transactions your business is expected to process. There are fees and charges involved with operating a merchant facility, so it’s important to know whether you need an EFTPOS facility for customers to swipe their cards, or whether you can get away with manual payment processing options until transactions increase.
4. Credit facilities
Many small business owners prefer to keep a business credit card for paying bills and expenses. This allows them to easily see all business expenditure reported on the same statement every month, which allows for easier tracking and reporting.
5. Fees and charges
Always take the time to understand all the fees and charges associated with your business banking account. Every bank will have a different schedule of fees associated with their products and services. Some will have monthly account fees. Others will charge transaction limit fees. Fees may also apply for teller-assisted transactions that happen in the branch instead of via internet banking.
Think carefully about your own transaction levels, merchant facility needs, credit card requirements and anything else that may incur a fee. This will make it easier to locate the right accounts to suit your needs.
6. Package deals
Many banks will be happy to package up multiple banking products and offer discounts on fees and charges for some of them. Always ask your bank if they’ll offer additional products with your business banking account, such as a merchant facility or a business credit card and check whether a package discount could apply.
7. Choosing the right bank
If your business earns a large portion of its revenue via electronically deposited means, you may not need to worry so much about having access to a branch; however, if your customers tend to pay at the point of sale in cash, you’ll need a way to deposit your takings regularly. This can mean choosing a bank that does have a convenient branch near to the business premises.
8. Comparison shopping
Regardless of how good an offer your own bank comes up with, always spend a bit of time comparison shopping. Big banks might sound more convenient for business banking needs, but many smaller banks and financial institutions are also able to offer excellent services at competitive prices.
By the time you’ve done your research into your business banking needs and located products that are best suited to your individual requirements, you should have a clearer idea of which accounts will suit you best.
