Not all bank accounts are equal and business bank accounts are no exception to the rule. Here, we will give a brief overview of several types of business bank accounts. We will also detail some of the features to look for in a business bank account.
Types of Business Bank Accounts
Business bank accounts usually come in two forms with the first being an everyday transaction type of account. This is typically where your revenue comes in. For example, when you invoice a customer, you provide them with the banking details for your customer to make a deposit. A transaction account is also where business expenses are drawn from. For example, when you make payroll, buy materials or supplies, or even pay for operating costs – cash comes out from your business transaction account. As such, you can usually pair a transaction account with business debit/credit cards. This way, employees can conveniently pay for business-related expenses.
The second type of business bank account is a savings account. Unlike an everyday transaction account, a business savings account usually has a fixed or variable interest rate. The premise behind a business savings account is so that you can park excess cash flow and earn interest.
Most business owners pick a business bank account at the beginning and never consider changing. While this may be convenient, you may be losing out on significant features and benefits if you were to shop around. For example, moving to another financial institution for your business banking may allow you to access more POS integrations and less costly card processing.
When shopping around for a business bank account, here are a few key features to look for when choosing a business bank account.
Low or No Fees
Some business bank accounts have monthly fees. You should look for a low or no fee solution is because it helps you save money.
Fees are an expense and reducing business expenses is an effective way to improve profitability. That is, by reducing your cost of doing business (see this blog post for a list of business costs), you will have more cash leftover even if revenue were to remain the same.
To find these, search for “no fee business bank account”, “zero fee business bank account” or “low fee business bank account” and check that there are indeed no account keeping fees before you make a decision.
In addition to this, if you’re a business that has to make frequent payments to overseas bank accounts, look at their FX fees to see how they compare with other services and banks.
Competitive Interest Rates
If you’re looking to earn interest on your business account balance, be sure to find an account with good interest rates.
First, make sure the account does not have any monthly maintenance fees. This is because monthly maintenance fees can eat into your earnings and quickly offset any interest you are earning.
Second, look for an account that offers a tiered interest rate. This means that you will earn a higher interest rate on larger balances. This can help you boost your earnings if your cash flow can support it.
Finally, be sure to shop around and compare rates from different banks before choosing an account. With a little effort, you can find an account that offers a good interest rate and helps you maximize your earnings.
Flexible Ways to Get Paid
Most business bank accounts offer multiple ways for customers to pay you. This is because each business gets paid differently and you’ll want a bank that suits your requirements. For example, many hospitality businesses accept cash payment and will need to deposit cash after business hours. In these cases, you’ll want to look for a business bank account from a bank with physical locations near your operations that offer something called a night depository.
Similarly, if you operate a business where payments are made in-person on-location, banking with a larger financial institution will give you access to supporting solutions such as EFTPOS and credit card processing.
Alternatively, for a business with an online checkout, you’ll want to get an account with a bank that allows you to integrate ecommerce APIs and credit card processing (e.g., the ability to charge clients at regular intervals, or a SaaS charging a monthly subscription).
Online Banking and Mobile App
Almost all business bank accounts offer online banking and/or access via a mobile app. This enables you to be able to manage your account from anywhere. As a busy business owner, the last thing you want is to have to physically visit a bank branch. This is especially true if you just need to take care of a simple banking transaction. Fortunately, many banks offer online banking or mobile applications.
Online banking and business banking via an app offer a number of benefits for businesses. They provide businesses with a convenient way to manage their finances, make payments and transfer money. They also offer businesses a way to track their spending, monitor their account activity and stay up-to-date on their financial status. This is extremely handy when it is time for tax reporting.
In addition, online banking and business banking via an app can help businesses save time and money. These services can eliminate the need to visit a bank branch or use a paper checkbook.
Customer Service and Corporate Values
Things inevitably go wrong when running a business – payments go missing and customer fraud or cybercrime is becoming a norm. This is where banking with the right financial institution that values you as a customer is priceless. This means being able to call a real person and having problems heard and resolved in a timely manner.
Corporate values are the guiding principles that dictate how a company and its employees behave. They set the tone for the culture of an organization. This can influence everything from the way a bank treats a customer to how their business decisions are made.
Corporate values can have a significant impact on customers. For example, if a company’s values include integrity and honesty, customers can expect to be as such. On the other hand, if a company’s values emphasize profits over people, customers may feel like they are being taken advantage of. In either case, it is important for customers to be aware of a company’s values so that they can make informed decisions about whether or not to do business with them.
Therefore, if you feel that the customer service or corporate values are lacking, vote with your feet and consider changing banks for business. And if you want to do so, Westpac (Australia’s oldest bank) has published a list of considerations to ensure that your transition from one bank to another has minimal disruption on your daily operations and for your customers.
Looking for a Business Bank Account?
There are many benefits of having a business bank account. Your bank will be your partner in receiving payments, extending loans, and much more. They can even help you determine the best payment processor for your business.
There are many factors that you must consider before opening a business bank account. Some of these include making sure the bank offers the services you need, like online and mobile banking. But also make sure you are getting a competitive rate, and the bank’s corporate values align with yours.