Which Bank Account Type Is Right For Your Business?
As a small business owner, you know that choosing the right bank account is incredibly important.
You need an account that can meet your specific needs and help you manage your finances effectively. But with so many different types of bank accounts available, it can be tough to know where to start.
That’s where we come in. This blog is dedicated to helping small business owners choose the right bank account for their needs. We’ll cover everything from the different types of business bank accounts available to the factors you need to consider when making your decision.
The importance of choosing the right business account
Selecting the right bank account for your business is a decision that carries significant weight.
Your choice can impact your day-to-day operations, financial efficiency, and long-term growth prospects. A well-suited business bank account provides you with the necessary tools to manage your finances effectively, including easy access to funds, efficient payment processing, and features like online banking to monitor transactions.
It also ensures that your business’s money is secure, while potentially offering opportunities to earn interest or access credit when needed. Moreover, choosing the wrong account can lead to unnecessary fees, missed financial opportunities, and operational inefficiencies.
Therefore, investing time in evaluating your business’s unique financial needs and selecting the right bank account is a crucial step towards ensuring its financial health and success.
Factors to consider when choosing a business bank account
When choosing a business bank account, it is important to consider the following factors.
The size and type of your business
If you’re running a small business with a relatively low transaction volume, a basic business checking account might suffice.
However, for larger businesses dealing with a high volume of transactions, opting for a business checking account with more robust features, like unlimited transactions and waived fees, could be essential.
Your banking needs
Think about the features that hold significance for your operations. For example, are you frequently writing cheques and requiring debit card access? Does your business rely on online transfers for convenience? Then, you may need a merchant account to facilitate payments.
By pinpointing these specific needs, you can streamline your search for the ideal business bank account — ensuring that it aligns perfectly with your requirements and helps streamline your financial processes.
Keep in mind that various banks adapt different fee structures. While some may charge monthly maintenance fees, others opt for per-transaction fees.
The key here is to select a business bank account with fees that align with your financial stabilities. This thoughtful comparison ensures that you don’t encounter unexpected financial burdens down the road, making your banking experience as cost-effective as possible.
Different types of business bank accounts
Here is a brief overview of the different types of business bank accounts available.
Business checking account
A business checking account is the most common type of business bank account. It is designed for everyday transactions, such as accepting payments from customers and paying bills.
Business savings account
A business savings account is a good place to keep money that you don’t need for immediate expenses.
Business savings accounts typically offer higher interest rates than business checking accounts, but they may have restrictions on how often you can withdraw money.
Business money market account
A business money market account is a type of savings account that offers higher interest rates and more flexibility than traditional savings accounts.
Business money market accounts typically have check writing and debit card access, but they may have minimum deposit requirements and transaction fees.
Business certificate of deposit (CD)
A business CD is a type of savings account that offers a fixed interest rate for a specific period of time.
Business CDs typically offer higher interest rates than other types of savings accounts, but you cannot withdraw your money without penalty until the CD matures.
If your business processes debit and credit card payments, you will require a merchant account.
When a customer makes a payment, the funds are initially deposited into this specialised account and are subsequently transferred to your primary business bank accounts once they have been verified.
In addition to these basic types of bank accounts, there are also a number of specialised business bank accounts available — such as merchant accounts for businesses that accept credit and debit cards, and international bank accounts for businesses that operate in multiple countries.
Tips when choosing the right bank account for your business
When it comes to selecting the right bank account for your business, a few key tips can make the process smoother and more effective.
Look for a bank that specialises in small businesses
Many banks offer business banking services, but some banks have more experience working with small businesses than others.
Look for a bank that has a dedicated team of small business bankers who can understand your needs and help you choose the right account.
Ask about referrals
It’s a smart move to seek out advice from fellow small business owners in your community. Don’t hesitate to reach out and ask for referrals — it might lead you to a bank that perfectly fits your needs.
They can share their own experiences and tell you which bank they use as well as why they chose it. This firsthand insight from other business owners can invaluable in helping you make the right decision for your own business.
Before settling on a business bank account, it’s wise to invest some time in shopping around and explore your options. This means looking at what different banks offer and comparing them.
You should read all the details and find out about any fees or rules. Don’t be afraid to ask questions if something isn’t clear. This way, you can make sure you pick the right account that suits your small business needs without any surprises later on.
Best business account providers UK
- Monzo offers a free business bank account called Monzo Business Lite. Monzo Pro is available at a reasonable monthly fee of £5.
- Deposits up to £85,000 are protected by the Financial Services Compensation Scheme (FSCS).
- However, excluding euro transfers, international payments are not supported.
- The standard Starling Bank Business Account include no monthly fees, faster payments, and FSCS coverage for eligible deposits. However, some features require the paid Business Toolkit at £7 per month.
- 24/7 customer support through various channels.
- Cash deposits at the Post Office incur a minimum £3 fee.
- Virgin Money provides a free business bank account called the M Account for Business, offering a protection of eligible deposits by FSCS.
- However, it is limited to businesses with an annual turnover of under £1 million.
- It lacks 24/7 customer support.
- TSB offers 30 months of free everyday banking to new business customers and provides flexibility in managing accounts through online, app, phone, or branch services.
- After the initial free period, a £5 monthly fee and transaction charges apply.
- HSBC offers new customers 12 months of free banking for both its small business and business banking accounts. Afterwards, there is a monthly maintenance fee.
- Everyday banking transactions are free.
- HSBC also offers business overdrafts, credit cards, and loans.
- It takes an average of 4.4 days to open an HSBC business bank account.
In conclusion, selecting the right bank account for your business is a crucial decision that can greatly impact your financial operations and overall success. It’s not a one-size-fits-all scenario; instead, it requires a thoughtful evaluation of your business’s size, needs, and long-term goals.
By considering factors like transaction volume, necessary features, fees, and seeking recommendations from fellow business owners, you can confidently choose a bank account that aligns with your specific requirements.
Remember, the right bank account can streamline your financial processes, provide valuable tools, and ultimately contribute to your business’s financial health and growth. So, take the time to assess your options and make a well-informed choice that will benefit your business for years to come.
Ready to make the best choice for your business banking needs? Wilkinson Accounting Solutions is here to help. Our team of business accountants can guide you through the process of selecting the ideal bank account type that aligns perfectly with your business’s requirements.
Contact us today to get started on the path to better business accounting.