Setting up a bank account is one of the first steps for any small business start-up. Former banker Carrie explains what to expect and the decisions you might have to make.
A bank account will manage your business revenue from clients and enable payments to be made to your suppliers. A bank account also provides clear records of your business transactions which will be required for your annual tax return.
The process of opening a bank account is straightforward, but completing and processing the paperwork – for example for identity checks or for company checks – may take time. It’s best to allow several weeks for everything to be completed.
Which bank account is right for me?
There are many banks which offer business banking accounts and it is worth taking time to consider your banking requirements. For example, most banks offer digital banking where transactions can be made on the go from mobile devices such as phones. Think about your current banking needs and also your future banking needs. As your business grows, your banking transactions will also grow and you may, for example want to offer customers different payment options and/or be able to take payments from international customers. Some banks are starting to offer support services for women starting and growing businesses, which may be a helpful source of additional resources.
What information is needed?
Opening a business bank account is straightforward. You will be asked to provide certain information such as:
- Your national insurance number
- Your passport or driving licence
- Proof of your address (for example a bank statement; utility bill or council tax bill)
- Your business details (such as business name; business address and business tax number)
- An estimate of your annual business turnover
Your business bank account will help you to manage your business cashflow efficiently. Regularly checking your bank account transactions will ensure you monitor cash in and cash out. It is important to have an adequate balance in your business bank account at all times to meet payments falling due and to avoid becoming overdrawn.
Your business plan should include a cashflow projection and you can monitor your projection against your business bank account transactions. When opening a bank account it is important to discuss your business plan with the bank. Your plan will demonstrate the vision of the business and set out how the business will operate in market, what will set you apart from the competition, your business goals and how they will be achieved. Having this insight will help a bank identify the bank account and services which may best help your business going forward. There’s more on what bankers are looking for in a business plan, here.