Opening a business bank account isn’t necessarily a requirement for all companies, especially those who start small and aren’t expecting to scale up too soon. However, that doesn’t mean that there aren’t advantages to having a business bank account rather than running professional funds through your personal bank account.
First and foremost, having a business bank account in your company’s name will give you an extra layer of professionalism. It also means you’re eligible for business loans, business lines of credit, higher financial limits and more.
So clearly, there are a variety of reasons why having a business bank account can be good for operations.
Having said that, however, there are some other factors that come into play that can make the process slightly more challenging than simply opening a business bank account and going on your merry way.
Mistakes To Avoid When Opening a Business Bank Account
As with anything, there are several things you need to be aware and careful of when setting out to open a business bank account.
Not Having the Right Documents
Opening a business bank account is an official process, and so in order to be able to be able to do it and get the job done properly, you need to have all the required paperwork ready to go. If you don’t you won’t be able to open your account, and there’s nothing more frustrating than being turned away and having to do the whole process all over again.
So, always make sure you’ve triple-checked what you need on the bank’s website, and once you’ve done that and got all your paperwork together, ensure that everything is dated properly.
The documents you’ll need include:
- Proof of business address (council tax statement, utility bill, etc.)
- Business contact details
- Business owner’s contact details
- Proof of identification of each named company director
- Estimated annual turnover
- Company House registration number (for limited companies and partnerships only)
The exact requirements very much depend on where you’re based – some areas require full credit history too, for instance – so be sure to be specific when you do your research.
Going with the First Option They Find
There’s no getting away from the fact that finding the right business bank account to suit your and your company’s needs can be a bit of a nightmare. But, in the long term, you’ll thank yourself for putting in the time and effort to find the right option, I assure you.
Now, there are a broad range of small business bank accounts to choose from, so shopping around is always a good idea. The easiest thing to do – and the trap a lot of business owners fall into – is to simply open a business account with the same bank that they use for personal banking.
However, while this isn’t necessarily a mistake, it’s not a good enough reason in itself to choose it for business. Rather, make sure you’re picking a bank for the right reasons.
This may include things like potential perks such as a personal advisor, high limits, low interest rates, telephone banking, a fee-free introductory period, foreign transactions, an overdraft facility and more.
Different companies will place varying emphasis on these services, so decide what’s important to you and keep an eye out for those things when picking the right bank for your business banking.
Not Factoring in Account Fees
Bank account fees are always something to be considered because even though they’re unavoidable, they can – and do – vary from one bank to the next. This means that it’s super important that you check out the different options and don’t just gloss over account fees.
Not only should you make direct comparisons of account fees, but you should also add them into your budget to ensure that you’ll be able to cover them. Unfortunately, a lot of people simply don’t add them in because they seem relatively low, but over time, these fees add up and you don’t want to be caught out down the line.
Forgetting to Consider Overseas Transactions
Even if your company is small when you open your business bank account and you may not currently be looking to expand overseas, make sure you consider your options anyway.
Different business bank accounts give you varying options in terms of operating in different countries and so on, so ensure that you’re clear as to what your account allows you to do as well as what you need it to do (even in a couple of years time) before you get locked in.
Forgetting to Consider the Future and Scalability
It’s easy to focus on the present when you’re setting things up for your company, and to a certain extent, you should. However, that doesn’t mean that you should ignore the future altogether.
It’s really important that you take time to think about where your business is and where you want it to go before you start setting up bank accounts and so on. If you want your company to be able to grow, you need to ensure that you’re giving it the space and potential to do so rather than confining and restricting it from the get-go.
