Choosing a Business Banking Account

Keeping your personal finances separate from your business ones is a perfectly sensible choice. UK law requires you to do so in many cases. You don’t want to mix the two for many reasons.
A business banking account allows startups to present themselves as legitimate businesses. It lets them pay tax returns, claim expenses, and keep a tab on incoming and outgoing operations. But there is more to business banking accounts.

Business accounts allow their holders to integrate accounting software to make it easier to track incomings and outgoings. They also let businesses use solutions like automated invoicing. And business accounts allow businesses to invest and re-invest their extra financial resources.

According to investingstrategy.co.uk, a business banking account “creates opportunities for them to further expand profits and perhaps make a difference by investing in another worthwhile organization.”

Businesses can opt to leave their cash in a business savings account, but low interest rates make that a non-option for those looking to at least preserve the value of their capital.

How do you choose a business account for your company? Some accounts suit your needs better than others. Here is a brief list of business banking account features and perks to consider before committing to one.

What You Absolutely Need

A business account must cover the basic banking needs of your business. Otherwise, it is pointless. You shouldn’t consider business accounts that do not give you the following:

• A current account for your day-to-day transactions. Some of these accounts may even pay interest on credit balances.
• A foreign currency account that allows you to do business with an overseas entity. If you do business with international partners, you may need to send and receive payments in their currencies.
• An instant-access deposit account. You may have cash on hand that you do not need daily but may still want to access quickly.
• An account that allows you to process credit and debit card transactions. With electronic payments now being mainstream, you need a merchant account to accept and make payments.
• A deposit account where you can keep the funds you do not need for daily operations and don’t have to access at a moment’s notice. Term deposit accounts may offer your organization better interest rates.
• A loan account allows you to access loans quickly and efficiently to support the operations of your company.

Fees

A good business bank account is fee-free and supports free bank transfers. Overdrafts aren’t good for businesses or individuals, but they may happen. And when they do, you want them to incur the lowest possible costs. Some business bank accounts treat all overdrafts equally. Others are more forgiving on planned overdrafts, charging a lower interest and offering higher limits.

All business banking accounts tend to penalize unplanned overdrafts with steep fees. Overdrafts used to be a grey area for banks, one that used to cause considerable financial harm to consumers. The Financial Conduct Authority has stepped in to protect the most vulnerable consumers.

A good business banking account should also allow the account holder to recover some cash when using some of its features, like debit card purchases.

Accessibility

Banks see their business banking accounts as financial products they sell to the public. As such, they tailor their account features with specific consumer segments in mind. A certain type of business bank account may only be available to businesses that realize annual turnovers of less than GBP 1 million. Since such accounts aim to serve small businesses, large businesses with annual turnovers exceeding GBP 1 million have to look at different options.

Some accounts may offer in-person banking. Others only have online access and banking through an app.

Features and Perks

Banking account apps can integrate third-party accounting software, track spending automatically, categorize outgoing transactions, and capture receipts. Automating these chores can be helpful for businesses.

Digitalization is the future. Our financial lives are going online, and our needs for in-person physical banking are waning. Still, we may sometimes need physical banking, and some bank accounts do not support this option. Other banks go out of their way to ensure a seamless customer experience, so they find solutions even if they don’t have physical banking means themselves.

Some business bank accounts may operate entirely online but still allow physical deposits through a Post Office branch.

If you are not a sole trader or a freelancer, UK law requires you to have a separate banking account for your business. Banking accounts endow organizations with the financial tools they need to keep their businesses running smoothly.