Starting a new business can leave your mind reeling – with a never-ending to-do list, it is no wonder 72% of small business owners feel overwhelmed with their responsibilities.
Whilst you may be excited to get your product or service out into the world, you must remember your business is more than what you’re selling, and there are a number of things you need to think about in order to help your business run smoothly in the long run.
One thing which should be at the top of your list as a new business owner is sorting out your finances, particularly getting your banking in order, so that you have tight control over where your money is coming from and going to.
Having an understanding of business banking is the foundation to good business ownership, and whilst it can feel overwhelming to get to grips with the basics, you shouldn’t worry. We’ve rounded up five things every small business owner needs to know about business banking.
- Know your business
First things first, you’ll need to determine what kind of business you are as that impacts the type of account you’ll be required to have.
If you’ve set up as a limited company, your business is legally separate to you. This means that you must have a business account separate to your personal banking.
For other business types such as sole traders, it is not a legal requirement to have a business banking account, however it is definitely beneficial.
At the beginning of your business ventures, it can be easy to run expenses through your personal account. Having a separate account for business allows you to stay on top of your spending and is much easier to keep track of if it is all separate from the word go.
When approaching banks to open a new business account, you might be required to present your business plan, so it’s important to have one prepared. Whilst some banks and financial institutions won’t want to see your business plan, it’s still a good idea if you want to access funding later down the line. Then, they’ll need to understand aspects such as where you place yourself within a market, how you aim on reaching you goals, and any expected costs.
- Understand what kind of bank will work best for you
Over the last 5 years, challenger banks have completely disrupted the banking market.
Challenger banks are banks which are app or online based – and do not having physical branches like the high street banks we are perhaps more familiar with.
Choosing which bank to open a business account with is completely personal to you and your business needs, but it pays to do your research and ask others – there is a general lack of trust for banks and deciding alone which works for you can be tasking.
While the traditional high street banks have the long-running expertise and benefit of simply being known making them advantageous, challenger banks have grown to be much more agile and work to meet customer demands in a much faster fashion than what one would be used to with the ‘brick and mortar’ banks.
For example, the vast use of technology amongst challenger banks means they are generally much quicker and user friendly than that of the high street banks. Furthermore, the security of challenger banks – though initially questioned- can be considered to be much higher, with the integration of facial recognition and fingerprints being deemed as much more secure than that of a traditional chip and pin etc.
Challenger banks have been known to push back on the subpar customer service that has been associated with the traditional banks. Focussing on instant response times and shorter processes for opening accounts, challenger bank’s ease of access and speed has made them very real contenders.
While these challenger banks have become known for their speed, ease and high standard customer service, the traditional high street banks still remain strong competitors. With power behind their name on a global standing, the trust in a physical bank can be hard to knock. Some people prefer going into a branch and seeing a face, the power of that can be hard to top.
So, how do you decide between them all?
Simply put you need to know your business requirements.
This may be swayed by the functions and tools offered in your account. For example, many challenger banks offer integration with other apps such as cloud accounting software. If you were looking to pay in money over the counter, high street banks may offer a better ease of access.
Not so tech-savvy? It may be wise to see which banks offer 24/7 business account support.
What’s in it for you? Remember to look at what extras the bank can offer beside from just your business account. While securing your money is priority number one – having added perks can be the edge which keeps you happy, after all despite this being business, remember it’s you that’s the customer! Knowing what aspects of banking are going to make your life easier is key when deciding upon the right bank for you.
- Service fees and charges
As a business owner, we don’t need to tell you that nothing comes free.
Understanding which banks offer highest fees and charges for their services, and what you are or are not willing to pay will play a big part in your decision.
There are a number of fees that are common in business banking. From one off application fees, transaction fees, ATM withdrawal fees, to overdraft fees – knowing what your prospective bank may charge when applied against how you intend to use your account, can be a big factor in your decision.
- Know when to jump ship
Whilst we’re here to discuss how to get to grips with business banking, knowing when it’s time to try elsewhere is something you can’t be afraid to do. Your business account has to suit your needs and knowing when it’s no longer serving its purpose is something you need to be aware of.
Granted, this is something to consider further down the line. Once you have set up your first business banking account, you’ll begin to understand which features work for you, and what could be missing from your account. It can be really helpful to stay up to date with what is happening in the banking world – what new features are being introduced and whether they could work for you. If your current bank cannot provide this for you then perhaps it’s time to look elsewhere.
- Small business accounting beyond the bank account
There are a number of decisions to be made surrounding banking in the early stages of your business besides opening a business account. One of the most important is the software you’ll use to manage finances in house.
Cloud software is the most popular option, but again, you should choose which cloud software works for you.
It is almost unheard of now for a small business not to use cloud accounting software in some capacity. While smaller businesses may choose to use these platforms in lieu of an accounting professional to save costs, growing businesses may use a mix of both in a way that is most suited to their business.
Popular cloud accounting platforms include QuickBooks, Xero and our very own Kashflow app. Knowing what you can keep on top of yourself with the help of mobile apps, and what you need to consult an accountant for is key in the smooth running of business. Don’t let things get on top of you.
Finishing thoughts… While it’s of no surprise that there is a lot to consider when opening your first business bank account, hopefully these five aspects of business banking can help to point you in the right direction.