Business Bank Accounts

If your business will be tiny or you’re likely to handle only a couple of large-ish cheques a month, then you can probably get away with putting them through your usual account. Otherwise you’re going to have to open a business account, and unfortunately they’re not free. You’ll usually get a period of free introductory banking with a business start-up account, but after that you basically pay in some way per transaction. Shop around and don’t necessarily stick with the bank you have your domestic account with. The banks will want your business so should negotiate, within reason, on the terms. Certainly don’t accept the first package they offer until you’ve at least tried to argue for a better deal. It won’t do any harm to try –after all, you’re in business now.

If you’re likely to have a lot of transactions passing through the account, then make sure you get weekly, or at least fortnightly, statements. You’ll need to keep track of what’s been received, what’s still owing and what’s bounced, and a month is too long to wait to find out.

When you come to open an account, the bank will probably ask to see your business plan plus details of where your start-up money is coming from. You’ll also have to provide all the usual ID. If you want more than one signature on the account, you’ll have to provide a list of names and examples of their signatures. You also need to say in what combination the signatures have to be used, for example two signatures per transaction.

Forget all the horror stories you’ve ever heard about bank managers and try to be their friend. It’s far better if you maintain a good relationship with them. So:

• Meet the person managing your account.
• Keep in touch with them.
• Send them a copy of your annual accounts.
• If you ever rewrite your business plan send them that too.

Go and see your bank manager immediately if you think your business could be in trouble. Take them into your confidence and tell them about your plans to sort things out. They’ll be immediately more sympathetic than if you wait for the cheques to start bouncing. You’ll also stand a far better chance of borrowing your way out of trouble if you’re seen to be managing your account sensibly.

The Start-Up Money You’ll Need

Sit down and write out a list of the equipment you already have: you’ll probably have more than you realise, items like a PC, printer, scanner, phone line, mobile phone and car. Then write out a second list of what you’re going to have to buy and price that up. Include the cost of:

• stock and/or raw materials
• taking on any premises
• equipment
• office administration, marketing and advertising.
• Add to that how much you and your family need to live on until the business makes a profit. Depending on your business, this could be for a month, a quarter, six months, a year, or even longer.
• Add to that an amount for contingencies and disasters. Again this will depend on your type of business, but it should probably be equivalent to at least 15–20 per cent of the above total.

Then think about how much money you have and how much you need to borrow.

The Timetable

• January of next year: buy second vehicle.
• Summer of next year: replace laptop and buy two new printers.
• Beginning of the year after: replace industrial ovens/kiln/sewing machine/lawn mower.