07 May Tips To Find The Best Bank Account For Your Small Business
Whether you are a small business looking for banking options or an existing business, wanting to upgrade your account, you need to know what is available on the market. This is a crucial decision and one that you cannot take hastily.
You also need to have a good understanding of the various options before making your final choice. Here is some information that will help you find the best bank account for your small business.
Types of Bank Accounts Available To Small Businesses
1. Business transaction account or checking account
This account is the one that you would use for all your day-to-day financial transactions such as depositing and withdrawing money, settling invoices with your suppliers as well as paying your staff and more. It’s also the account that you would use to receive various payments from your customers.
Most checking accounts offer an overdraft facility which is subject to approval. Each bank will have specific criteria for qualification. Some banking institutions would require you to maintain a minimum deposit or provide proof of business. Certain banks would have a monthly service fee, while others would not charge this.
It is important to note that your business bank account isn’t a personal account. For all bookkeeping and tax purposes, Accountants, as well as financial institutions, recommend that business owners maintain independent business and personal accounts.
2. Business savings account
In this account, you can earn interest on any extra funds that you may have. It is a revenue stream for you as you can make money on various assets of your business. Just like any personal savings account, the bank will also need you to provide notice before permitting you to withdraw any funds from the business savings account. These accounts are a good tool when it comes to long term planning. The longer you maintain funds in the account, the higher the returns.
3. Business term deposit
This is very different from a savings account. Every business term deposit would have a fixed interest rate and expiry date. This financial instrument allows you to deposit money for a specific time. Which is called a ‘term’ and you get a set return. If you default on meeting the terms of the account, the financial institution would typically charge a penalty fee.
How do business bank accounts work?
Unless your objective is to deposit or save capital, you will use your business checking account as the main account. Let’s take a closer look at how these accounts work. This facility helps to protect your business’s capital while allowing you to make transactions.
As mentioned earlier, this is the account that you would use on a day to day basis for receiving payment from your clients, tracking business expenses as well as fulfilling invoices and paying your staff members. It’s the account that you would need to maintain as part of your regular business working.
When banking institutions are issuing a business account, they will provide you with a checkbook, debit card as well as access to their online banking services. Different institutions have different practices regarding the monthly fees, deposit charges, interest rates, as well as withdrawals. Some accounts could have features such as credit cards as well as in-branch services while others would not.
As a small business owner, when you are comparing business accounts, you need to spend some time determining what your priorities are and which features you would need for your business workings.
Finding a small business account best suited to your needs
Like any personal account, all business accounts differ from each other. You must conduct a certain amount of research and shop around before determining which account would suit your needs best. Many banks regularly run promotions to attract new clients; you can check whether any of these exist and you qualify for them. Some of the things that you should be focusing on include:
- Maintain clarity about why you require an account and then look for one that serves your business purposes well.
- Always compare the fees that the bank is charging. These fee structures can be quite confusing, and it is worth the effort to spend some time researching which account offers you the best value for money.
- Select an account that compliments your business size as different types of accounts are available. Some cater to the needs of sole traders while others are more suitable for small firms, and yet others are best for large corporates.
- Keep your credit needs in view. Certain bank accounts would offer overdraft facilities, business line of credit as well as a credit card. If you feel that you might need some additional working capital in the near future, look for accounts that offer you lending services.
- It is also necessary to keep your support requirements in view. Some banking institutions specifically deal with corporates while others centre their operations on catering to small businesses which makes them more accessible for someone who is starting out.
- You would also need to consider foreign fees. In case your business does foreign trading and/or makes regular payments to global suppliers, check what the foreign transaction fees are. Some accounts would be better suited to global companies.
- As stated earlier, look for the offers that banks are promoting at any given point. Sometimes, if you have a personal account with a particular bank, they might be happy to offer you a new account on a loyalty deal.
Regardless of the type of account that you opt for, it is crucial to go through the terms and conditions, fees and other details so that you can make the best use of it. Consult an accountant and get their advice on the matter as well.
For more information about how to choose the right bank account for your business, contact the experts at Benchmark Cost Solutions at this number – 1300 170 585. If you prefer, you can also request a call-back or write to us at this email address, and we will revert quickly.
Thanks for reading,
Benchmark Cost Solutions Team
1300 170 585