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Choosing an IT contractor bank account

Published on Feb 15, 2007 |

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Selecting the right business bank account is an important task when setting up as an IT contractor for the first time.

There are several key things to consider - such as transaction and borrowing costs, what facilities the bank offers, and the type of relationship you want from a bank. Here are some suggestions which may help you decide which bank would best suit your needs.

1. You must set up a business account if you're starting up as a Limited Company, Partnership or any other key business structure. Sole Traders can use their own personal accounts (or via a new account - John Smith trading as XYZ). Most contractors set up Limited Companies.

2. Don't necessarily choose a business bank account simply because you are a personal banking customer. You may well feel more comfortable with a bank you already know personally, but they may not offer the best deal for your business.

3. Make sure you compare several business bank account offerings - a good place to start would be with the MoneyFacts business account finder here. This will provide you with an overview of the costs and charges associated with most business accounts in the UK.

4. Naturally, only go for banks that have a strong background - names you will have heard of, or even internet banking brands which are owned and operated by the big players.

5. Bank Charges - a key point to consider is how much it will cost you to have a business bank account. You may have a large number of monthly transactions to process, for example, so ensure you know exactly what charges will be levied on your account before signing up. Many major banks provide "free" banking for set periods to new businesses, so this may also be of interest.

6. Online Banking - this is an increasingly important service, and most banks now provide an internet service so you can check the status of your account day or night. At ContractEye, and our previous businesses, this is an essential service. Rather than ringing the bank to check if a payment has been made to your account, you can do this yourself in a fraction of the time.

7. Interest - although the major banks have improved their interest rates on business current accounts in recent years at the request of the Government, they do vary wildly. Some high street names pay virtually nil interest if your account is in credit, but there is always a trade-off between free transaction costs and interest rates, so do consider the overall benefits each account would provide to your business.

8. Small Business Team - go for a bank which has a specialised small business unit. The setup process should be simpler, and dedicated teams will be used to dealing with all types of small business and their specific needs. Some IT Contractors will require regular contact with their bankers, so you should go with a team you feel you can build a good personal relationship with.

We highly recommend the Alliance & Leicester Startup Banking Offering - 2 Years Free Banking - more details here.