By Anna Jordan on Small Business UK - Advice and Ideas for UK Small Businesses and SMEs
Switching a bank account can be one of the first steps a business can use to take control of their finances. Once a business owner is clear about what they want their bank account to do, they can start to look for it and once they find what they are looking for they can switch to it. From finding the right account with the right bank and the right business manager, to new ways to control revenue and outgoings, to better digital support, all of these things can persuade people to switch.
However, research from the Current Account Switch Service (CASS) and Small Business reveals that 20 per cent of entrepreneurs are using their personal current account for their business banking.
Though it may seem more convenient to bank on your personal current account, you could be putting yourself at a disadvantage. Here, we outline some benefits of switching to the right business bank account.
1: Better functionality
Are you able to carry out all the functions you need in your business account? The one you are using now may be cheaper, but you might not be able to carry out some vital business functions. Does your business account have digital services that allow you to manage cashflow or expenses? Does it link well with money management apps or payment systems? Do you have the right level of access to a business adviser? Are you able to easily deposit cash or do you need support to help your business go cash free? List the services you need then match them to an account before you plan your switch
2: Greater protection for you and your business
A good business bank account is a means of protecting your identity as the account will be under your business’ name. As the number of transactions you make will likely be higher than on a personal account, you’ll need greater security. Banks tend to have information in place to warn business banking customers of potential scams, as well as security systems that can help you spot scams. If you are worried about fraud, switching to a bank that offers more protection could be a business-saver.
3: A better relationship with your bank
Having a business account may help you build a better relationship with your bank. You may have a business banking manager as part of your account. They can also give you advice to help drive your business forward. You might also want to seek other financial assistance from them at a later stage so it’s a good idea to get acquainted with them early on.
Eight per cent of survey respondents said they have the type of bank account they have due to it being required by their bank. In some cases, your bank won’t let you use your personal account for business transactions, even if you’re a sole trader. If your bank catches on that you’re using your personal account for business, they may close your account – and sever any kind of relationship that you previously had.
4: Incentives
Of course, you were expecting this one. Business bank accounts offer perks which could be useful for your operation, such as free accounting software or a card reader. Some give you a free banking period too, say 12 or 18 months.
I’m not sure what type of account I use
Rather worryingly, two per cent of survey respondents weren’t sure what type of account they had. If you’re not sure, check your online banking service – it should tell you, even if it’s purely based on the name of account you have. If that doesn’t confirm it, contact your bank.
It is also worth mentioning that there can be perks to having your personal and business accounts with the same bank. You may be entitled to discounts and other perks if you have both accounts with one provider – you’re depositing more money with them, after all. It does feed into a couple of the reasons mentioned above, like building a stronger relationship, which in turn can help with moves like taking out a loan later down the line.
A simple and stress free way to switch your account
To switch your business account using the Current Account Switch Service between participating banks or building societies, you must have fewer than 50 employees and an annual turnover not exceeding £6.5 million.
First, you need to find a new account, looking for some of the features above. Once you’ve found it you need to go through your payments, cancelling the ones you no longer use so they won’t be switched to your new bank account.
Then you need to get your documentation ready so your new bank can carry out the necessary security checks. Your new bank will tell you what you need, but it might include your trading address, a Companies House registration number, and other documents relating to the business and proof of identity like a passport, driving licence or bank statement. You may want to ask for documentation like statements from your old bank before switching.
Then contact your new bank, open an account, negotiate the right arrangements, such as an overdraft and choose your switch date, allowing for seven working days and making sure you don’t set up new payments during that period. Then you can ask your new bank to start the switch. Thanks to the Switching Guarantee, everything will be protected. Then you can start using your new account and start enjoying the benefits of taking control.
Find out more at the Current Account Switch Service.
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Half of SME owners have never switched business bank account
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Anna Jordan, Khareem Sudlow
