Digital banking: Choosing the right bank account for your business

Time

Previously applying used to take weeks or even months. Now most banks offer a quick online process, sometimes enabling you to be up and running in minutes.  This can save you valuable time, enabling you to focus on your business and revenue-generating priorities, both when starting up and when opening an additional account for your business.

Also be aware that not all banks follow the same account opening process. Check whether the banks you’re considering offer an online process and whether they also require a branch visit. Digital banks will typically offer a fast online application process, which isn’t always the case with traditional banks.

Service

As online banking has become more prevalent it’s easy to forget that times will arise when you do want to speak with someone from your bank on business-critical items.  You should check whether the banks you’re considering make it easy to contact them via phone call. Testing how easy it is to find a phone number on their site is a good starting point.

• Chat bots can be useful but check whether your bank also offers a telephone option – digital banking apps can vary in how readily they make this available.
• Do the banks you’re considering have a call centre in the UK?
• Do you want to speak to a person face to face? If so, a traditional bank may be a better option. But check how many branches your potential banks have in your area.

Alternatively, if you are comfortable with manging your business banking online, not all mobile and digital banks offer the same access.  With some you will only have the option of a mobile app while others also offer full online banking from your laptop.

Acceptance

If you are likely to have issues with being accepted for an account, consider checking whether the bank carries out a full credit check or not. Newer/digital banks often only require an ID and address check, as well as anti-money laundering (AML) checks, which can make the process smoother if you have a thin credit file.

Protection

Not all banking apps have a banking licence. It is worth checking this, as non-banks will typically not have FSCS protection. A bank with FSCS protection will typically advise of this in the footer or by displaying the FSCS logo.

Cost

Costs can vary, so it is worth reviewing your potential banks’ pricing tables as a starting point.

It is important to look beyond introductory offers and “free banking periods”. Once these end, what are the real long-term costs? If you are on a “12 months free banking” type offer, check what tariff you will be moved to once the free period ends.

When comparing costs, take your cashflow forecast and overlay it onto the bank’s pricing table:

• How much cash are you likely to deposit?
• How many bank transfers will you need to make?
• How often will you need to withdraw cash?

Some of these itemised fees can vary significantly and will make a real difference to your long-term banking charges. Depositing cash is a particular itemised cost to look out for –with some high street banks this can cost as much as 1.5%.

Features

Many banks and banking apps now do more than just help you transact and move around money. Check what other features they have that may help you to manage your money:

• Does the bank have a mobile app that gives you 24/7 access to your money?
• Can you categorise your spending/transactions and create spend reports?
• Can you attach receipts against your transactions?
• Can you add notes against transactions?
• Is your account integrated with your accounting package?
• Can you order additional expense cards for staff?
• Does your bank allow you to pay in cash if required? (Banks and banking apps that don’t have branches should typically allow this via the Post Office.)

In this age of digital banking, you might still have customers who pay in cash or need to be paid in cash.  Ensure your bank accepts cash deposits.

And if you use an accountant, check what accounting software they use and ensure that your bank connects to this. New Making Tax Digital legislation is now in place for VAT-registered businesses which will require you to maintain digital records and submit tax returns through approved software.

Additional value adds

Does the bank wrap any additional value adds into the account? For example, do they have discounted business insurance, payment acceptance or accounting software?

Does the account have any special offers? Some banks offer no monthly charges for a fixed period or cashback on card spend, which can make a real financial difference to companies that have a lot of spend on stock, suppliers, online marketing and other business expenses.

Lending

Not all banking apps will offer an overdraft or business credit cards. Check whether this is something that is possible with the bank you’re considering. Even if you don’t need this immediately, it’s worth having the option for months where cash flow is tight.

Get the right information

As a small business owner, you should compare a few options before going ahead. It’s worth checking some traditional brick-and-mortar banks, as well as digital banks, which tend to be ‘online only’. Get recommendations from other small business owners. Check out reviews and ratings from trusted independent sources.

Shared from FSB