Business
Banking - Business Finance
About
Business Banking
These
are some of the questions you should ask when opening a Business
Bank Account:
- Is
it just about looking for the highest rate of interest?
- Why
do I need a bank account?
- Is
it necessary to open a business bank account?
- What
type of account can I open?
- How
do I open a bank account?
- Should
I have monthly statements?
- I
have a bad credit record what can I do?
- Can
I bank a cheque in a different name to my account?
Is it just About Looking for the Highest Rate of Interest?
With a small business it is more prudent to look at charges as opposed
to interest rates. Whatever your balance is in your bank, small
business accounts will always attract charges. It is also wise to
remember that great interest rates usually mean high penalty interest
on overdrafts.
If
you do want the best interest rates then look to an on-line
provider. The providers are trying to tempt volume customers
to use on-line services. They are not only trying to establish themselves
on the Internet, but also have the benefit of having less costs
for Net users: so that equals more profits for the providers - but
in the short-term the profit is being handed back in the form of
higher interest rates.
Do I Need a Bank Account?
Everything you do in business revolves around money. This money
has to be identifiable at every stage of the transaction and of
course the money also needs to be identifiable from your own finances.
Opening a business bank account is the simplest way to achieve accountability
and provide a good degree of transparency in your business dealings
to enable government departments, creditors and auditors to assess
your business. A business account will also give you credibility
as your bank has assessed and accepted your business proposal.
Do I have to Open a Business Bank Account?
No you don't. If you are a sole trader or an informal partner and
you have a personal cheque or deposit account, it is acceptable
to have customers write their cheques to you personally and then
for you to bank them in your personal account. Now this is obviously
at odds with the above paragraph as there is no clear line or way
to account for money attributable to your business: this is a big
problem, but it can be done in circumstances where there is little
choice.
What Type of Account Can Shall Open?
Open a standard cheque book account or current account. At this
stage your only interest should be to create a facility where you
can pay in cheques and withdraw money. You won't want a savings
account for ALL the excess money you will accumulate in the first
few months of business, nor do you want to take out business insurance
usually with the banks commercial insurance arm.
If
you are a sole trader you can open a bank account that will have
your name and trading style i.e. Dave Jones trading as Jones Truck
Services. If you intend to create a limited company you will need
to have your limited company set up before your visit to the bank.
Opening a Bank Account
Your current bank is not necessarily the best bank to open your
account with. There are a few reasons for this:
- banks
offer a different degrees of business start up accounts: some
have no charges for two years, Internet banking, an instant cash
card, 24 hour availability
- keeping
your business life away from your personal life will make sure
that your bank is not in total control of your finances
- a
bank that does not have you using all of its products is very
keen to offer the best deals.
Make an appointment with your bank they will probably want to see
most of the following:
- a
business plan
- where
your start up finance is coming from
- information
about signatories and who are your partners
- a
rough breakdown of the business
if
you are a limited company the bank may want to see your ‘Certificate
of Incorporation’ for limited companies.
Monthly Bank Statements
At first you may get the choice of monthly statements, some banks
may allow free weekly or fortnightly statements. Whatever the banks
offer for free if it is not weekly then its not enough for you.
It is better to pay extra than to estimate from monthly to monthly
statement. If there is something wrong, a cheque bounced (returned
unpaid), or a cheque stopped, a slight overdrawn situation you need
to know quickly or risk high penalty fees. Banks don't allow free
periods for penalty payments and only experienced bookkeepers can
survive with monthly statements.
What Can you do If you have Bad Credit?
Business bank accounts are not as difficult as personal accounts
to open. There are a number of reasons for this. Business accounts
are profitable for the banks. That is not to say that anyone can
get a business account, but if you have a business plan and it is
viable, with the bank not having to fund you or provide you with
anything more than a business cheque book, acceptance should be
a formality. Paying in an initial amount of cash can only help.
On-line Banks
If you are comfortable using a computer and you feel confident
enough to use and understand on-line banking it has to be a solid
choice. The charges for paying in cheques and withdrawals should
be less than a standard bank account.
List
of Business Finance Providers
OCIS
provide general financial information, we urge you to consult an
Independent
Financial Adviser ( IFA )
before making any important decisions about your finances. |
