The ins and outs of business bank accounts

When you're setting up in business, opening a bank account might seem like one of the most straightforward steps. But as chartered accountant Steph Gubas explains, there's a lot to think about.

Opening a business bank account will have crossed the minds of most business owners, whether you're a director of a limited company or a sole trader that wishes to keep your private finances separate from your business expenditure. Overall, there are several advantages:

1. A business bank account will keep your finances orderly, making the running of your company more efficient.
2. It will assist your accountant in completing your accounts more effectively.
3. You won't have to filter through your personal account trying to determine which is a business and private expense – a very tedious job!
4. It will help to build a credit rating for your business. If you handle your account well, then this may help further on down the line, should you need or wish to apply for business credit cards or loans.

However, with there being so many options out there, you might find it hard to choose which business account to apply for. Here are some ideas of what to look out for:

Fees

Most business accounts will have various fees and tariffs they will charge for using specific services. These may include a monthly maintenance fee, cash deposit/withdrawal fees, cheques in/out fees or transfer fees. While they might seem a lot, it is important to remember that these charges are all business expenses and therefore tax deductible. In addition, many establishments offer an initial 'free banking' period, meaning you won't have to pay these monthly charges for around 6-18 months depending on the bank.

Eligibility

Numerous business accounts have specific criteria which determine your eligibility. Some examples are:

• Turnover
• Age (you may need to be over 18)
• Status as a sole trader, partner or company director
• Personal current account holder
• Registered in the UK

It is also important to be aware that certain accounts require you to be trading for a minimum number of months in order to obtain an overdraft.

FSCS

If your business is cash rich, then it will be important to know whether your account is protected under the Financial Services Compensation Scheme. This scheme protects the first £85,000 of customers' money, so it will always be beneficial to choose an account that has FSCS protection to safeguard against any worst-case scenario. However, it is important to note this is per financial institution and not per bank account. If your business has more than £85,000, then it would be advantageous to split it across different institutions so that more of your money is protected. For example, if you had a bank account with Halifax and Bank of Scotland, then only £85,000 would be protected across the two accounts as both of these businesses are owned by Bank of Scotland PLC.

Integration with bookkeeping software

If you or your accountant use digital software to conduct your bookkeeping, then it may be beneficial to choose an account that integrates fully with this software. It is now possible to link your business account with your accounting software, such as QuickBooks. This allows your business transactions to be automatically uploaded, which reduces admin time for both you and your accountant. In addition, the connection with QuickBooks is completely secure as it is purely “read-only”, meaning no one can move or use any of your information in QuickBooks. We can offer professional advice on the platform, as we are designated as platinum partners.

At Page Kirk, our aim is not simply to provide a basic compliance service, but also add real value and insight by being your trusted business advisor. You can rely on us to be a port of call for any queries or questions which you encounter while running your business. Do you want a team of trusted advisors to discuss the practicalities involved in starting a business, setting up a bank account or running your company? Then please call us on 0115 955 5500 or email enquiries@pagekirk.co.uk