Business banking: a review of accounts for small businesses

If you’re a small business owner, it’s smart to consider opening a separate business bank account solely used for the financial running of your company.

This account would be used only for business transactions, rather than personal finances. If you’re thinking about opening a bank account for your business, you may be wondering how these types of accounts work and what they can offer you. So, that’s what we’re going to take a look at today.

What is a business bank account?

Put simply, a business bank account is a type of current account designed specifically for business use. Whether you’re a fledgling start-up or a more established small business, this type of account has something to offer.

Opened in the name of the business, your business account can be used for all and any day-to-day transactions related to your company, including employee payroll and the purchase of goods and services. In turn, this enables you to keep your business transactions separate from your personal transactions, all in one place. As a sole trader, this can prove incredibly useful when it comes to filing your Self Assessment tax return.

What can I do with my business account?

Business accounts usually operate in the same way as a standard current account, and you can expect the usual features such as:

• The provision of a debit card for in-store and online transactions
• Functions for setting up and managing direct debits and standing orders
• A mobile app for ease of money management
• Cash withdrawals from ATMs
• The ability to make and receive electronic payments

Whilst business bank accounts have many of the same features as personal accounts, this type of account does offer some services that are inaccessible to personal account holders, including but not limited to:

• Processing payroll payments
• Carrying out credit checks on suppliers and other businesses
• Actioning transactions in foreign currencies

Do I have to use a business bank account?

A business bank account is a legal requirement in the UK for limited companies.

If you are part of a general business partnership or are a sole trader, however, you don’t need to have a separate account for business transactions. They are still very beneficial, though, as they allow you to keep track of things such as:

• Company cash balance
• Money that is owed to the business
• Money that you owe to creditors
• Employee payroll

Business bank accounts tend to be widely available to sole traders, partnerships, limited companies and other types of business. You can usually choose from different types of accounts, too, such as a business current account or a business savings account.

How do I choose a business bank account?

If you’ve made the decision to open a current account for your business, there are several things you ought to take into consideration:

• Transaction charges – these are charges made for handling money moving in and out of your account.
• Standing charges – some business accounts will charge a monthly or quarterly fee for their services
• Internet banking – if internet banking is a deal breaker for you, make sure you check first that your chosen bank can provide this and provide it well.
• Interest rates – accounts with higher interest rates will provide you with greater returns on any savings
• Branches – opting to open an account with a bank that has a nearby branch in your locality offers a number of advantages, including the ability to easily deposit cash, for instance.
• Introductory offers – many providers may offer incentives and short-term rewards for opening an account with them, so it’s certainly worth checking out what is on offer with different banks.

Looking for help or advice with your business finances? Our experienced accountants can provide the guidance that you need. Contact us today.