Starting a business? Getting into the gig economy as a freelancer? One of the first things you’ll have to do is get your finances organised. And that means understanding what makes a good business account and which one suits your needs.
Once you have a better idea of starting a business and why you should have an effective business plan, it’s time to learn more about bank accounts. Having a clear idea of what makes a good business account will go a long way in making life easier for you.
As per law, only limited companies are required to open a business bank account. But even if you’re a sole trader, it’s a good idea to open a business bank account because of the benefits it offers:
It will help separate your personal and business finances
It will make your business look more professional even if it’s a one-person operation
A business bank account makes it easy to understand your cash flow and expenses
The best startup business accounts will also help you understand the profitability and financial health of your business
A small business bank account makes it easy to calculate and pay taxes
It will make it easy for you to accept payments through various channels
A business bank account will also get you an overdraft and a credit facility
You should open a small business bank account as you set up your company. This is what will help you disburse salaries and payments to vendors. It will also help you understand your payables and receivables if you integrate the account with an accounting app. If you’re expecting investments, a business bank account will make it easier.
While there are several kinds of business accounts offered and customised by various banks, they usually fall under the following three categories:
For startups: This is aimed at startups, small businesses and sole traders. It would have the required business tools plus a free period to attract entrepreneurs.
For established and growing firms: These are structured according to the turnover of the business. Fees would depend on the size of the firm.
For non-profits: Banks offer low-fee services to charities, schools, clubs and any other social organisations.
You should enquire whether all transactions are charged or whether charges only kick in after you cross a limit. Or whether there are lower fees for online transactions. You should also figure out if they have flexibility with the fees for startups or sole traders.
Usually, banks will state on their website and in marketing material if they have any offers. But it doesn’t hurt to ask for an introductory offer.
Based on the stage of your business, you may require additional services such as everyday access, specialist support, business tools etc. In lieu of offers, some banks may offer a service for free, at least for a limited time.
Are your transactions mostly online? Do you plan to accept international payments? Would you be disbursing salaries from this account? Do you have an accountant or will you be managing finances on your own?
What makes a good business account? When it suits your specific needs.
One of the benefits of opening a business account is that it offers fund protection and insurance. In the UK, it’s up to £85,000.
Details of the business, along with contact information and registration or trading addresses in the UK
Detailed information of all directors, partners or members of the business
Information on the business’s cash flow or forecasts
For limited companies, the registered number of the company with Companies House
Opening a good business account is one of the wisest and most influential decisions you can make. The question of ‘what makes a good business account’ should be carefully considered by anyone starting out on their own. It will decide whether your finances are transparent, easy to manage and healthy.
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