How do I decide where to open a business account?
When you first set up in business your finances might be quite simple, especially as a sole trader, which leads many people to use their personal current account for a period of time before even considering a business account.
But as the number of transactions grows, tracking your business money in amongst your personal lifestyle spending can become harder and harder.
Especially if you register a limited company or partnership, you probably won’t want those transactions running through your personal account anymore – and in fact, your bank’s terms and conditions might prohibit it.
So the obvious next step is to open a business account. But where can you open a business account – and should you accept the default business bank account offered to you by your current account provider?
Business banking with your current account provider
You shouldn’t accept a financial product just because it is offered to you. If your current account bank is trying to push you into opening a business bank account with them, it can only mean that it would be profitable for them if you do so.
And if it makes more money for them, it probably costs more money for you – so always make sure you check whether there is a monthly admin fee on the business bank account offered to you, and what the transaction charges are.
Considering all of the different business accounts on the market, it is quite unlikely that the one offered to you by your current account provider is the best option. It might be – but you’ll never really know unless you compare the alternatives.
Barriers to business banking
Branch-based business banking has its drawbacks, and often the procedures you are asked to follow mean you hardly get a branch-based service anyway, as you may be required to send deposits away to be counted off-site and just told to trust the total that comes back.
In this day and age it can be much easier to operate with as little cash as possible and, instead, let people pay you by direct transfer into your account. For anyone with online banking or a mobile app, this is probably the preferred way to pay too.
That opens up your business account landscape considerably, as you don’t have to be tied to a physical branch – and that makes online-only business accounts worth considering if you just need a quick business account with all of the usual payment methods.
What is an online business account?
An online business account is similar to a business bank account in a lot of ways, although some providers like Arro Money are not regulated as banks, but as online money service providers.
But it can have the important features of a conventional bank account, including a sort code (even though it is not tied to a physical branch anywhere) and account number that allow people to pay you their invoices via a direct transfer of funds.
You can access Faster Payments to send money out to cover your own bills too, as well as Direct Debit for any ongoing supply agreements with authorised firms.
In fact you will often hear people with an online business account refer to ‘online banking’ and ‘direct bank transfers’ even though their account is not regulated as a bank account, because in some ways the way you use your account is indistinguishable.
Benefits of online-only business accounts
One of the big benefits of an online-only business account like the Arro Business Account is that we developed our online account dashboard from scratch, unlike the banks where it is often just a tacked-on portal to view your physical account details.
With ours, you can view, sort and filter transactions, including singling out debit card payments that are more likely to represent petty cash, or Direct Debits that are more likely to be ongoing overheads.
It’s a powerful way to gain real insight into your business finances, with traceability of where incoming payments are from – not just a stack of anonymous cash at the end of the day – and of outgoing spending too.
And with a professional Business MasterCard® debit card that can be used for cash withdrawals at ATMs, you’re not blocked from spending your business’s profits when you need to.
You can buy things by chip and pin or contactless transactions directly using your card, get cash in your pocket from your business account when you need it, or pay for goods online by debit card too.