Pros Of Switching Business Bank Accounts
Let’s first look at the advantages of changing business bank accounts:
- Simple and quick: All popular banks are signed up with the Current Account Switch Service, which makes changing business bank accounts simpler than ever before (more on this later).
- Opportunity for better service: If you aren’t happy with your current provider, research different business bank accounts to find the best one. You don’t have to settle for poor customer service; vote with your feet, and find a bank that works with your needs. Some banks may offer a personal fund manager, or something similar, to help make your experience more efficient.
- Lower fees: There are potentially new bank accounts offering lower monthly fees than what you are currently paying. Staying on top of bank charges is essential to ensure you aren’t paying more than necessary. There are various competitive deals with many banks vying for your business.
- Personalised service and products: Most banks offer the opportunity to customise your accounts to meet your business’ needs. For example, if your company requires many foreign transactions, there may be a business bank account with lower fees than competitors.
- Improved account features: Take note of what you need from a business bank account. Do you need an account with higher transaction limits? Whatever you need, there is a vast range of options, so find a business bank account with the right features.
- Competitive interest rates: Along with competitive features and services, banks are fighting to offer companies the best interest rates. You could save a lot of money by switching bank accounts to one with lower interest rates.
- Rewards: Financial incentives have become essential for business bank account providers. It’s a way to give customers the best rewards for simply using the service. Take a look at what’s on offer. You might be able to score big time based on the type of business you’re in. Air miles are a popular reward for business accounts, for example.
- Improved products: Based on your industry, competing banks could offer more in terms of loans, accounting software, or merchant services. Some UK banks are known to be tailored to specific industries.
We have a guide to some of the best business bank accounts in the UK to advise which bank might be best when it comes time to switch.
Cons Of Switching Business Bank Accounts
Where there are pros, there will always be some cons. Let’s take a look:
- Somewhat disruptive: Opening a new business bank account, no matter how seamless, will disrupt your company’s day-to-day operations. You must notify customers and clients of the change, update financial records, and possibly rework standing payment arrangements.
- Time-consuming: Researching the best account options takes time. You’ll also have to consider the time needed to set up a new account. The bank will need all your financial records and company information to provide you with the best options for your business.
- Switching challenges: If you’ve ever had to swap phones, you’ll know the struggle of switching anything can come with its cons. Switching business bank accounts is no different, and there may be some hurdles to overcome initially.
- Loss of relationships: If you’ve been with your current bank for an extended period, you will lose the trust built over the years if you switch. You’ll need to start building a relationship with your new financial provider from the ground up.
- Loss of customised services: Once you’ve built a report with your current bank, they know the services your business requires. This means they can offer you access to services that might benefit the company. You may not have that at the start with your new bank.
- Impact on credit: Switching business bank accounts might require reassessing your company’s credit facilities. Building trust with a new bank takes time, as they learn about your company’s financials and what to expect.
- Costs: No matter how you slice it, there will be some costs involved with switching business bank accounts, whether it’s monetary or time. Keep track of the new account fees when switching to ensure you know what is expected from your end.
Choosing to switch business accounts can be daunting, but it might be your best decision as a business owner.
What To Consider Before You Switch Business Bank Accounts
There are a number of things to consider before deciding to switch business bank accounts:
- What are the monthly fees? You shouldn’t be paying more banking fees for the same level of service. If you make the change, there needs to be an incentive. Also, note when banking fees are charged and how much they are, so your company is prepared.
- Is the account accessible? There is no point in switching if the new account has hurdles for simple services. For example, can you access company money from a range of ATMs? What are the charges for making these withdrawals?
- Is the bank fully regulated? This should go without saying, but you’d be surprised how many banks mask themselves as banking heavyweights with nothing to show. It’s best to go with an established bank that is regulated.
- Is the bank accessible? Take note of how the bank does business. Are you required to go in for every little incident, or does the bank offer online help to sort issues out quickly? If you do need to go in, is there a branch nearby?
- Is there room to expand? Consider what the bank switch would mean for your business. If you switch, what does the new bank offer regarding credit facilities and loans? Are these facilities aligned with where you see the company going and its growth projection?
- Is the bank technologically reliable? Does the new bank have the technical capacity to handle your business’ finances? For example, consider whether the banking app is easy to use and what functions are available.
If you’re a little unsure of where to start, take a look at these free business bank accounts. Once you understand the basics, it’s easier to make an informed decision on setting up paid business bank accounts that work for your business.
What Is The Current Account Switch Service?
The UK government backs the Current Account Switch Service to make changing bank accounts easy, reliable, and quick.
The scheme guarantees that your new bank will handle the switching process. It ensures that all payments into your old accounts get redirected to your new banking account. Furthermore, everyone on the payroll and who makes payments to the company will be informed of the switch.
If there are any issues with payments during the switching process, your new bank guarantees they will reimburse you in full.
Most banks within the UK form part of The Business Banking Switch Scheme, ensuring that all your banking needs are covered throughout the change. This process is already stressful, so having this service can be genuinely helpful for small businesses and sole traders.
Switching bank accounts generally takes about seven working days. You can still access your original account until the switch is complete.
The scheme has taken one of the most stressful things for a company and made it a much smoother and more reliable process. It encourages businesses to find a bank that suits their needs, rather than sticking with a bank for fear of what comes with switching.
The Current Account Switch Service is available for small businesses with fewer than 50 employees and a turnover of less than £6.5 million annually.
How To Switch Business Accounts
Don’t worry; switching business bank accounts isn’t as tricky as it sounds; the process is generally simple and quick:
- Research your new bank: First, you should have a new bank in mind for where you want to switch to. Look at what the bank is offering and assess why changing would positively impact your company.
- Submit your documents: The bank will need company documents to open the account. This includes financial statements, credit history, name, address, and permission from all owners.
- Open the account: Once you’ve decided, you simply need to open a new business account. You can do this online or in person at a bank branch. Just be aware that bank cards can take up to ten working days to be available.
- Let your customers, employees, and suppliers know: You should advise everyone involved that the company is switching business bank accounts and provide them with your new bank details as soon as possible.
- Begin the switch: Contact the new bank and ask that they start the switch via the Current Account Switch Service. From there, you can request a date for the switch and remain updated on how the process is going.
- Keep your records in order: All company records and stationery should have new banking details. This includes updating all accounting software with the new account details.
- Close the old bank account: Once the entire switch is complete and you’re happy that everything is working as it should, you can close the old account.
This sounds like a lot, but switching business bank accounts is easy, thanks to the new government schemes. The scheme makes the switch reliable and straightforward, particularly if you’re a sole trader or own a small business.
Is switching business bank accounts difficult?
No; the Business Banking Switch Scheme has made switching business bank accounts very simple and quick. However, you will need to spend time researching the best business bank accounts for your company and provide all the necessary documentation to the new bank.
Will switching business bank accounts affect my credit history?
It shouldn’t. Switching to a new bank can only affect your prospective credit offerings because you need to establish a relationship with your new bank. In comparison, the previous bank could have offered credit opportunities based on what they knew about the business from a well-established relationship.
Can I transfer my existing direct debits and standing orders to the new account?
Yes; that’s where the Business Banking Switch Scheme also comes in handy when making the change. Your new bank ensures that all standing orders and debits are applied to your new business banking account.
How can I ensure a smooth transition when switching business bank accounts?
The most important thing is keeping all relevant players in the business informed. You must ensure that employees, customers, clients, and suppliers know well in advance that the company account is going to change.
Can I switch business bank accounts if I have outstanding loans or debts with my current bank?
Yes; but you must read the loan terms carefully before doing anything. Your current bank might have additional charges if you choose to switch. You must also confirm any credit facilities you may require with your new account with the relevant lenders.