Bank accounts

Should you open a business bank account prior to starting?

There is no legal requirement for you to have a separate bank account from your ordinary bank account. Indeed, there is no requirement for you to have any bank account. If you decide to keep your money in a tin under the bed, recording the ins and outs of your account on a roll of toilet paper, in pencil, then you’re not breaking any law.

Clearly, it would be in your best interests if you didn’t keep your money in a tin and you maintained correct records. My own opinion is that you do need a separate bank or building society account for your business. Many of your clients will want to pay you by cheque and to tell them you only accept cash is not only unprofessional but might also invite an investigation from the Inland Revenue.

Could you use your personal account for your business?

Banks and building societies have certain restrictions on how you manage your personal accounts. Generally, you are not allowed to use your personal account for business use. Instead you will be invited to apply for a separate business account. If you’re trading as a sole trader, which will be the most common form of trading entity for the majority of gardening businesses then your business account will be in your name followed by your trading name, for example Paul Power trading as Paul Power Landscape Gardening.

Building societies have now entered the business market and appear keen to encourage new business accounts. Certainly many are now offering a far more imaginative account package than the high street banks, with accounts that pay a far more generous rate of interest on your money and if you need to borrow their charges on the whole appear lower.

Be sure to shop around

Treat your banking as you would any purchase. Shop around and get the best possible deal. Ask lots of questions and read all the bumf they give you carefully. Go straight for the kill and start with the small print. How much is banking with so and so going to cost you after the initial period of free grace? Compare charges, overdraft fees and everything else, before opening your account.

Despite the relatively high costs, I believe having a separate business account is necessary because:

• You know where you are on a day-to-day basis without having to wade through your personal statements.
• Bookkeeping and record-keeping are certainly made easier and, if you employ a bookkeeper, their fees may be reduced.

Here is a list of some of the things you should look for in your business bank package.

Bank checklist

• Initial free banking period, minimum 18 months.
• Or life-time free banking, provided you manage your account within certain prearranged limits.
• Debit card.
• Cheque book.
• Paying in book.
• Monthly statements.
• Twenty-four hour access to your account via the internet.
• Seven-day-a-week telephone banking service.
• Interest on your current account balance.
• Clearly defined cheque clearance cycle – how long will it take for what you lodge to arrive in your account?
• A genuine interest in small businesses – don’t always go for what they say in their brochure.

Most business bank accounts will include the services of a relationship manager. Their sales literature will detail what this person can do for you, that he or she will take a special interest in both you and your business, and that they are as determined as you to see you succeed.

My experience has been something different. While my relationship manager was friendly, approachable and an all-round good egg, it was very clear to me after our first meeting that he was working for the bank and not for me. His interests in my business were limited to his bank’s interests. The discussion we had concerning my banking needs largely centred around whether or not I had sufficient insurance and the like. I was left with the impression that his interest didn’t go beyond that of selling me the bank’s products.

When I actually needed the bank’s help in the way of having a short-term overdraft to see me through what I had imagined was going to be a lean few months, my application was turned down. Every time I went into my branch to make a lodgement I was scarcely acknowledged by the morose staff.

The final straw came when I received a nice letter from the bank wondering whether I’d ever considered starting a business and that if I wanted an information pack on what they could do for me, all I had to do was ask. Nothing was too much trouble for them. Having banked with this bank for over 11 years, I was appalled that they didn’t even recognise I was one of their customers. To think of all the interest that I’ve paid in these years, not to mention the charges I pay for having my personal account with them. Enough was enough. It was time to change. I looked around at all the various packages available, and the organisation that satisfied the above criteria was the one that got my business. Relationship managers are a very nice idea, but don’t you think if they knew half as much as they say they do about running a small business, they’d be doing it themselves?

I have now switched my business banking to a building society, where I not only enjoy a high rate of interest on any funds in my current account, but also free banking for life provided I maintain my account within certain pre-agreed guidelines.