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How Do I Choose A Business Bank Account?

This blog post is up to date at the time of writing. Things are changing fast in banking so please make your own checks. 

 

Business bank accounts are a subject I am asked about a lot.

Which is the best one?

A client was shopping for her first business bank account and asked for help. Here’s the advice I gave her. [Update: now includes the new mobile based accounts]

 

How To Choose A Business Bank Account

Firstly, are you reading this because you want to open a business bank account or because you feel you should?

Read Can I Use My Personal Bank Account for Business if you want to know what your options are.

One thing I have found with accounts from the banks are that all of them have both good and bad testimonials from a wide range of one person business owners. I have yet to find one bank that is mostly all good (recommend) or mostly all bad (avoid).

[Update: until recently that is. Most of the new mobile based ‘fintech’ accounts are pretty solid and other than a few concerns I have I share later, it’s an exciting time if you’re in the market for a bank account for your business]

What’s right for someone else may not be right for you. My recommendation is to use other factors than testimonials to determine your choice [update: and I stand by that]. 

 

UPDATE: New Number 1. Shortlist The Fintechs

Fintech is shorthand for financial technology and it’s arguable the UK leads the world in it (go us!).

Finally banking and money management is arriving that doesn’t feel like it oozed out of the 19th century based on white men in suits (I don’t know a single mainstream bank like that at all, do you? Ha!)

Fintech has been around for quite a while and I’ve been keeping an eye on it for quite a while but it’s only been since mid 2018-early 2019 that it’s really settled down and I feel comfortable including it.

The fintech account options are mobile based, which means they work through an app in your phone. So you need a smart phone, data plan and internet and to feel comfortable with tech as default.

If your business has almost all electronic payments (the occasional cheque is ok), you may want to look at the fintech bank accounts first.

If your business is mostly cash or has a lot of cash payments, probably your standard bank accounts will fit your needs best. I can see this changing as the fintechs get more wired into the standard system (Starling uses the Post Office for example).

I may be too cautious with this, but if your clients are mostly or all corporates and you have a larger turnover/profit, going traditional may be a better bet unless your clients are the big tech companies or similar.

Fintech companies include:

  • Starling
  • Coconut
  • Tide
  • Monzo
  • N26
  • Revolut

This is a super fast changing area so I’m not going to look into what each of them offer as it’s probably changing as I type.

Instead, these are a few issues to look out for:

  • What is it? A bank with a banking licence or e-money? The difference is often hidden but it’s legally different and the protection is different. If it has a banking licence, which country is it in? A UK licence is different to a European banking licence
  • Does your money have legal protection if it goes tits up? How much and under which scheme in which country?
  • Have you seen any news which makes you feel icky about the company – personal opinion of course. Revolut ‘fabricated stats’ in an ad campaign (and a few of my clients won’t bank with Barclays or HSBC because of stuff they’ve done. Your decision). 
  • If your bank access is mostly mobile app only, can you keep your phone properly secure? Do you use a VPN for banking transactions?
  • How much access do you have to broadband and mobile data networks? These are internet based accounts. Having said that, a lot of traditional bank branches are closing so that’s one less reason, you might argue, to open an account with a high street bank

 

Good stuff about the fintechs:

  • Usually free or at least not much more than a traditional high street bank
  • Most have a debit card
  • Most have mobile apps that aren’t prehistoric (but remember, they’re app based so that means restrictions of another kind)
  • Look up how they handle cash deposits and cheques
  • Don’t charge you a massive whack in my pet hate ‘non sterling transaction charges’ (saves money and time doing your tax return and a major reason I switched)
  • Make money management a breeze (a huge reason I switched for my personal account. Happy to talk this through with you if you’re a client, if you’re not, book a free call to talk through if I can help).
  • Much easier to open an account (took a minute + verification for mine. I was on the sofa. No shlepping to an inconvenient bank branch location and making an appointment and losing half the day).

So there you have it. 

Look up the fintech companies. 

Now let’s go back the list based on when fintech wasn’t an option.

 

1. Shortlist Banks With Convenient Branch Locations

Imagine the scene. It’s been a long week. Your child is sick and has kept you up all night for most of the week. Your partner is away, you have a splitting headache, and to top it all off, a client is late paying and your mortgage payment is due. Suddenly, miraculously, your client sends you a cheque for the full payment. RELIEF! You can pay your mortgage. Except your bank branch is half an hour away and you need to pick the kids up from school in 35 minutes and by then the bank will have shut. Oh, and it’s Friday.

Make a list of bank branches which are easily accessible and with parking/bus route/etc. It won’t happen very often that you need to make a fast deposit to save your bacon. On those times, you will praise yourself that you can do it.

2. Shortlist Banks With Less Convenient Branch Locations

Sometimes the near-to-you factor is worth trading off for other benefits.

Make a list of bank branches near enough to matter but not too far away. I can’t be more exact as it depends on your location. If you’re in a rural town, less convenient may mean the city an hour’s train away whereas in London it could mean a Tube into central London (which can easily be an hour!).

3. Where Is The Business Manager Based?

Business bank accounts have a separate manager covering several branches.

Ask where the business bank manager is based. Usually they are in a particular branch on a certain day and if you want an appointment not on that day or it’s urgent, you need to go to another branch. Sometimes this can be in a difficult location. While these things happen, it’s easier if you are forewarned so if that urgent appointment is needed you at least know there will be a parking problem for example.

4. Do You Have A Good Business Bank Manager In Your Area?

A good business bank manager is worth travelling for. 

In my experience, most do not stay in one particular job long, have little experience, haven’t run their own business, and have remarkable lack of knowledge in micro business basics. My personal favourite was the manager who wasn’t aware of digital technology. I needed to explain what Twitter was. If you’re a plumber I am sure he was probably fine. If like me most of your marketing is digital, or you work in digital media, you may be best to go elsewhere.

However, there are business bank managers out there who are angels in human form. I’m going to name and praise and say that Helen at Natwest Woodley, Berkshire, is one of them. I don’t know if she still works at that branch but she’s a shining example of what should happen. I met her at a networking event, she makes it her business to understand one man bands and how we operate, and she was a pleasure to spend time with and work with.

It’s worth your time asking around your local area if one of these business gems exists. It can make a big difference having a bank manager you have a relationship with who knows your business. (If you know a great business bank manager, please share in the comments).

5. Pro’s And Con’s

Step 5 and this is when you look at the pro’s and con’s of your shortlisted banks and their accounts.

Suggestions of what you may want to look at:

  • Fees & charges
  • Ease of operating the account
  • How up to date are they? Are they ahead of the curve (for a bank) or behind it?
  • How helpful are they?
  • Are you treated with respect?
  • Parking/access/public transport
  • Do they hard sell/try to sell you options you have said you don’t need?
  • Quality of customer service on phone and online
  • Attitude to micro businesses and self-employed mortgages
  • Your view on the banks’s ethics and policies
  • Does your accounting software have an automated feed with this bank?
  • Do their security gadgets suit your life (HSBC has a titchy PIN gadget, Barclays has a large thick one. This is about what works for you as security needs to not be a hurdle or you won’t take it seriously)
  • Ask for local experiences of each bank
  • Add your own items to this list

You may want to consider whether you want your business bank to be the same as your personal bank. Some people do as it’s convenient, others don’t as if there is a problem it makes it easier if they’re separate or if there is a bank crisis (e.g. 2012 Natwest computer failures).

6. Research Smaller Banks

There are more banks available than the big high street chains.

Look into private banks (not as scary as they sound), ethical investing banks (e.g. Triodos) and banks with fewer branches (e.g. Metro Bank).

Decor. Usually not an issue with banks but there is a good reason I have only been into a Metrobank branch once (shiny floor and gloss black = sensory nightmare. Thank goodness banks are one of the few safe harbours that have no ‘ambient’ music.

7. Ignore Freebies

A bank account is often what feels like life, not just for Christmas. Don’t get sucked in on freebies.

Most business bank accounts have free banking for the first 12 or 18 months. It shouldn’t be the only factor in your decision and it’s ok for it to be an important one if all other factors are equal. It isn’t a freebie with little real value.

8. Make A Decision

You’ll probably have only a few options when it comes down to it. It’s a good opportunity to learn what’s out there and be more familiar with business banking as it can feel daunting at first.

Allocate some time, look at what you need, make a decision. Don’t get into analysis paralysis.

9. Open Your Account In Branch

Opening an account online is easy. Opening an account in branch can be stressful (see above concerning managers knowledge of modern one man bands).

However it’s worth your while opening the account in branch. That’s because your account sort code belongs to that branch which can make it a lot easier when problems happen. If you have a concern, issue, something goes wrong, with online accounts you are limited to customer service. With a branch based account, you have the option of face to face and customer service. I found this out the hard way!

Ask the bank. It may be that with some banks you can open your account online and nominate your chosen branch as your home branch. If the bank says you can do that, take a note of the time, date, what was said, and who said it. Just in case it doesn’t happen….

10. Make Time For Me Time

After your account opening appointment, book something special for yourself. Maybe afternoon tea, a spa appointment, listening to a new album in the park.

Appointments can take from 90 minutes to 3 hours so time to yourself afterwards is an essential rebalance. It’s a big step in your business, be proud.

 

 

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I Can Help

If this post resonates with you and you’d like to talk through how I can help you and what that would look like, book a call with me (it’s free). We’ll talk about what you need and how I can help. You can also email me if you’d prefer.

Rosie x

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