Has free business banking ended?

For years small businesses have been able to benefit from free banking, even if that has meant moving from one bank to another to benefit from free banking offers. However, currently there are very few of the leading banks offering free banking. Judith Dugdale looks at ways in which you can minimise your charges.

How to reduce your charges:

– Firstly, ensure you are on the right tariff. If you are turning over less than £250k and need limited access for “face to face” communication at the bank, ask for their internet bases package. This package is much cheaper as internet transactions (BACS, Transfers, Bank payments, Direct credits) all tend to be free of charge. However, if you may require help you will have to contact a call centre rather than a bank manager in branch.

– Reduce the number of cheques you cash and cheques you write out. Ideally banks want to increase the number of transactions online and therefore they have increased the cost for cashing and processing cheques. Speaking to suppliers to ask if you are able to pay by direct transfer will help you reduce bank charges.

– If you have large amounts of cash which you need to bank in order to pay wages, you may want to consider paying yourself and some employees in cash. This is instead of writing them a cheque or paying them by direct transfer. However staff acknowledgement is essential to ensure that cash has been received and is traceable to avoid challenges should a dispute arise. You may also be able to pay suppliers in cash. All of these will reduce the amount of cash you pay into your account and therefore reduce your bank charges.

– Some banks have policies in place that limit the amount you are able to withdraw from your account each day. It is wise to make sure you are aware of your limit and by simply taking cash out over a number of days could save you money on cash withdrawal charges.

– Some building societies offer charge free accounts for businesses, including those that are paying in cash. This is due to the large amount of other customers they have that are coming in to withdraw cash.

– A large percentage of small businesses who accept credit cards automatically use their bank for processing. Card processing is a growing area and there are more providers than you think, so don’t assume your bank is the most competitive. The percentage banks take can vary considerably therefore it would be good to shop around for the best deals.

Ensuring you have the best bank charges and you are not being over charged is something your accountant will be able to check for you. You may find you don’t need to change banks. Initial structures within banks can sometimes be revised when customers have had a quote from another bank. It appears that managers have more discretion over charges than you might think and individual “deals” are not unusual, particularly where a customer is being moved away from a free banking service. This isn’t always possible but it is definitely worth asking the question.

Overall, do not rule out changing banks on the basis that you think it will be too much hassle. In reality it is a much smoother process than many think and can often benefit you and your business.

For more information on this topic, please call me on 01772 821021.