Your bank can make an enormous contribution to the long term success of your business, assisting funding, cash management and payment transfers. But as with any other expenses in your business, be sure that you always get the value you expect and don't pay more than necessary.
Bank fees are an often lamented fact of life for most business owners. Whether it's because they're considered too high, overly complicated or just unfair, the reality is that the "user pays" system of banking is here to stay.
What can you do to save your business money and cut down the bank fees your business incurs?
Shop around: Every bank has its own fee structure which you should compare against the needs of your business. Banks also individually assess the risk in lending to your business to determine the interest rate on your loans, which can vary significantly from bank to bank.
It's important to look at all the offerings available and find the account, fee and interest rate package that gives you the best value for money. Don't forget that this should be reviewed regularly, in light of changes to the fees and charges you're paying, the alternatives available from other providers and the evolving needs of your business.
Negotiate: Contrary to the perception of many businesses, bank fees and charges are usually negotiable. Whilst the actual reductions achieved will vary from bank to bank, the main reason customers don't receive them is because they don't ask. Reductions usually depend on the account size, the total suit of fees the bank earns from your business and their desire to win or retain your business. Using an offer from a competing bank to identify fees that are too high is one successful method to reduce fees and charges incurred.
Know your accounts: Your business could save hundreds of dollars by simply taking the time to read up on all the fees and charges that could be applied to your accounts, taking particular note of how these could be incurred or avoided.
Avoid penalty fees: Fees for an overdrawn account, dishonoured cheque or direct debt often cost up to $50 each. To avoid these unnecessary fees, make sure that you know your account balance and are aware of upcoming cheques and direct debit withdrawals.
Most businesses rely on the receipt of payments from customers to meet their own commitments, so it's important to keep track of payments and ensure that they are received into your account in time to meet these commitments.
For those that can afford it, another alternative is to keep a modest amount in your bank account to cover unexpected withdrawals and avoid penalty fees.
Minimise debt: It's surprising how many businesses have credit funds in one bank account earning minimal interest, whilst incurring unnecessary interest changes on an overdraft at the same time. If debt is a necessity, keep it to a minimum by regularly transferring credit funds in other accounts to reduce the loan balance, or even consider consolidating the accounts.
Be prepared: If you think that you're bank account is likely to become overdrawn, be pro-active and seek approval for an overdraft facility. This option is usually cheaper than the penalty fees for an unauthorised overdrawn account. It'll also avoid the embarrassment of having your payments potentially dishonoured.
But be careful, only seek approval for an overdraft limit that your business really needs and will use, otherwise you may incur needless establishment and ongoing undrawn line fees to have an unnecessarily large overdraft available.
Internet banking: Most businesses have discovered the convenience and ease of internet banking. The other big benefit is that it's generally cheaper than traditional banking through your local branch or using cheques. Whilst many may need to visit the bank occasionally, by making payments and transferring funds online you'll save incurring needless fees.
Keep account: Track each bank fee your business is charged and ensure that no fees are being charged to your account that you don't understand and expect. It may only be $5 here and $10 there, but they quickly add up.