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.
Separate bank account
You must set up a separate business account if you’re forming a limited company, as your company finances are completely distinct from your personal funds. If you are a sole trader (which is unlikely), you can continue to use your personal account for your business income too, although a separate account would always make things easier.
Your current bankers
Although it may be convenient, don’t assume that your personal banking provider will be the idea fit as a business bank. There are undoubtedly benefits from being able to link accounts with the same provider, but you should be objective and consider all other factors first (such as your ongoing monthly tariff).
Established, trusted players
Almost all contractors will open bank accounts with major high street banks (who dominate the market). It is always prudent to consider only the major players, or brands operated by established names – despite the bad press the industry has received since the credit crunch.
Perhaps the most important thing you should establish is how much it will cost you to run a business bank account after any ‘free’ banking period has expired. As most contractors have a limited number of monthly transactions being processed, you may well find a business account which offers genuinely free banking on an ongoing basis.
Online business banking
All the big banking names provide online banking services, although the quality and features can vary significantly. For most contractors, aside from the ability to check accounts 24/7, the main requirements will be that you should be able to export data, pay bills online, order statements, and set up direct debits.
Although the BOE bank rate is at an all time low, the amount of interest paid on business accounts does vary wildly. Many banks do not pay any interest on business current accounts, although there are exceptions. You are more likely to realise some interest on business deposit accounts, which are useful if you’re putting money aside to settle future tax liabilities.
Small business specialists
You may well feel that you don’t need any ‘help’ from a specialist small business banking team, but if you do, make sure you are provided with a single point of contact at your bank.
Chances are, you will be invited for an initial meeting with your small business specialist. Unsurprisingly, the quality of your contact can vary wildly, and don’t expect your contact to know what an “IT Contractor” first time around!
The Cashplus Business Account is a popular choice within the contracting industry, as you can have an account number and sort code within minutes of applying. Very handy if you need to provide your clients with banking details urgently.