Do you know what you are spending on banking fees and charges? Has it gone up or down in the past year? What is contributing to the cost? If you struggle to answer any one of these questions, then NOW is the time to look at your business banking fees.
Why do I pay so much in banking fees?
Banking fees and charges arise mainly from:
- transactions such as online payments, Direct Debits, and Standing Orders
- cash lodgements
- bank teller services
- interest on loans or overdraft facilities.
The amount you pay in banking fees depends a lot on the kind of business you have, which in turn affects the bank services you use. For example, if you have relatively few customers who pay you large amounts of money once or twice a year you will pay less in transaction fees than a business with lots of customers who pay every month.
But every business can find ways to save on their banking fees, so check out these 8 tips:
1. Use Online Banking
Most businesses already use online banking but if you are still old school, you should think of switching. Using an online banking service for business has lots of advantages and enables you to:
- Save time and effort on e.g. bank visit; writing and posting cheques
- Keep up to date on your account information by viewing balances, transactions, and statements at any time
- Make immediate or scheduled payments to any company or individual
- Make international payments
- Pay salaries or suppliers by creating one transaction which makes several payments at once
If you have moved your business banking online already, make sure the package or service you receive best matches your needs and offers the best rates for your business banking activity.
You can find out more about online business banking during our next Startup Webinar.
2. Automate your transactions where possible
Even if you bank online, you should also review the way you carry out your transactions. The obvious automated services include ATM/Quick Lodge cash and cheque lodgements, ATM debit transactions but you could save time by using other automated transactions such as direct debits, direct credits, and standing orders, and by encouraging your customers to use such transactions.
3. Coping with cash
Although businesses and customers alike are moving rapidly towards cashless payment, cash is still an unavoidable reality for many businesses. The cost of making cash lodgements actively discourages many business owners from banking their cash. Instead, many still use cash to pay wages or suppliers.
While this might save on cash lodgement fees, it does present a challenge in terms of recording income and expenditure. None of these transactions will appear in your bank statements so you need a robust system of record-keeping to follow the cash as it comes in and goes out. Check out our basic bookkeeping tips for advice on keeping records.
4. Use the direct debit and credit schemes
If you have large numbers of customers making regular payments into your account, this generates high levels of transaction fees. You can use the Direct Debit system to reduce these.
For example, if you have a hundred customers each making a single payment every month – you pay 100 transaction fees. If you move all of these customers to a Direct Debit system, where the payments all come in on the one day, then you will only have to pay one single transaction fee. You could offer customers a discount to pay by Direct Debit, as an encouragement.
Direct Debit also improves your cash flow, because you control the collection date avoid problem debts from arising.
Similarly, if you make a large number of payments, you can get substantial savings on your fees by switching to direct crediting of (paying directly into) suppliers’ accounts, if you don’t already do this online.
5. Check your cheques
If you are still writing or receiving cheques, make sure that all the details such as the date, amount and signature are correct, thereby avoiding the potential for unpaid cheque charges.
6. Keep good records
Keep statements and other documents relating to the operation of your account safely so that you are not charged for duplicate copies. It can be particularly tricky if you are missing older statements you thought you did not need.
Most businesses bank online now, and some online services only go 3 months back for statements. This could mean making special orders for older statements and paying extra charges for them. The bank statements is also part of the bookkeeping that you need to do for your business. Check out our bookkeeping for small businesses guide for more information.
7. Plan ahead
Depending on the nature of your business, you should have a pattern of income and expenditure that both you and bank are familiar with. Your banking facilities and how you use them should reflect this pattern. Sometimes your needs change, however, and you need to plan ahead for that.
Planning ahead can help you avoid significant additional charges, such as unpaid charges, referral item charges, and interest surcharges.
For example, if you have an overdraft and know it is likely you will exceed your account limit – even for just one day – talk to your bank beforehand about raising your overdraft limit on a temporary or permanent basis. Also, make sure your overdraft reverts to credit for at least 30 days in a 12-month period.
If you don’t have an overdraft facility, make sure you operate your account in credit.
If you have a Loan Account, make sure repayments are made when they fall due in order to avoid interest surcharges which are payable on the amount in arrears.
8. Compare banking fees & charges
Do shop around if you feel you are not getting the best deal from your bank. Shopping around does not just mean comparing regular monthly or quarterly fees. You need to check the charges for the various transactions and services – such as cash handling – which your business uses most. A good deal for one business may be a bad deal for another, so taking advice from a friend may not work.
To help you along, check out these lists of charges from the main banks below:
Some banks offer a 2-years no fee deal, deal but do check terms and conditions.
At Accountant Online, we offer accounting services for new startups that aim to meet your compliance obligations, while also keeping costs low. We help you get it right from the start so you can avoid costly mistakes.
Kiera leads the Bookkeeping, VAT, and Payroll Teams at Accountant Online. Kiera has worked in the financial services industry for over 18 years. She is passionate about helping businesses to get their finances in order so they can get back to what’s important: running your business. Kiera holds a part-qualified accountant qualification from ACCA.