Bank Account Review
Nearly three quarters of small businesses never or rarely change their bank. But regularly reviewing what’s on offer – and being prepared to switch your business account – could massively benefit your business, advises Sarina Saul-Hassam.
Having a proactive relationship, a partnership really, with your bank is absolutely vital for any small business, especially in a challenging trading climate.
Too often a small business owner will get started, get their business bank account up and running and then leave it at that. This can be especially the case if the business is ticking along nicely; there may be a sense of “why do I need to bother?”
Yet we encourage our business banking customers to speak to us on a regular basis and, ideally, carry out an annual review of their banking.
Why? Because, that way you’ll always be sure you’re receiving the best level of service, expertise and value for money.
On top of that getting “face time” with your bank helps build an important relationship and potentially opens the door to discussing alternative funding options or additional facilities to help you expand.
A lot of small businesses, we find nowadays, assume banks are not lending to SMEs, which is just not the case. In 2012, for example, we lent £12.3bn to small and medium-sized enterprises, an increase of three per cent on the previous year.
The big concern with switching naturally tends to be the worry it’s going to result in loads of hassle and paperwork or, at worst, interruption to your business.
But switching accounts is much more seamless than it once was; at HSBC for example it can often be done in as little as an hour to an hour-and-a-half. Generally transferring direct debits and standing orders will take up to 14 days.
We, like most business account providers, have a dedicated “switching” team. We also offer a named relationship manager as the business owner’s main point of contact, which helps immensely. Again, some banks may offer deals to encourage switching, in our case up to six months’ free transactions.
Depending on the size and complexity of the business, something like this can be quite a significant saving. So, especially if you’re quite a cash-based, heavily transactional business – as many salons are – it’s worth looking at the sort of benefit deals such as these might offer.
Every business, of course, is going to be different and no one realistically expects small business owners to switch banks all the time. But the key message is that it makes real business sense to be proactive about your banking.
How to cut your banking costs
According to business financial services company CashFlows UK, businesses spend more than £2.3bn every year on banking charges. As a result, insurance company Simply Business has suggested five ways to get the most out of your account:
- make sure you understand the charges, especially those associated with transactions you carry out most frequently;
- plan ahead to reduce the number of deposits and withdrawals and consider holding on to cash rather than immediately depositing it;
- automate through electronic payments, as charges for BACS or Faster Payments tend to be lower;
- stay in credit (as much as you can) by drawing up accurate cashflow forecasts; and
- don’t be scared to switch providers, especially if a bank is offering an introductory period of “free transactions”.
Questions to ask…
Market researcher YouGov last year found nearly three quarters (73 per cent) of SMEs “rarely” or “never” searched for a better banking provider. Just three per cent looked for better offers all year round.
More worrying, around 15% said they had tried to switch provider in the past two years, but only eight per cent had succeeded. Of those, only 12% said they had found the process “easy and painless”.
The British Banking Association recommends you ask the following questions when researching whether to move to a new bank:
- What will be the rate of interest and how does this compare with my current bank?
- What will it offer in regards to overdrafts and how much will I be charged for going into the red?
- What loans are on offer, and what does the small print say?
- Will I be able to get free access to my money from other banks’ cash machines?
- How much will transactions cost, is there any set free amount each month?
- How good is it at dealing with complaints?
- What is its internet banking service like?
Sarina Saul-Hassam - HSBC