Can’t we just all keep our money under our pillows? Then we do not have to deal with this thing called a bank and the bureaucracy that comes with it.
Well unfortunately not. Banks are part of our ecosystem and we rely on them for handling our cash flow as well as funding our businesses. In many ways are they are integral to the success we achieve.
(a) Business account
Nearly all small businesses need to have a business account. If you have dealt with a bank in a personal capacity for any length of time, then you have a track record with them and they would be more likely to look favorably to your request for a business account. Alternatively, nowadays it is rather easy to open a bank account with most banks by simply initiating this on their website.
It is important to use the business account only for matters relating to the business – keep your personal banking totally separate from the business.
Once you’ve opened a business account, you should obtain a stamped letter from the bank indicating your bank account number and branch details. You should also receive a debit card along with opening such an account.
With a business account, you will receive a monthly bank statement, which sets out all your deposits and withdrawals. You need to check this against your books and make sure that it is correct. Banks rarely make mistakes on statements, but errors may occur. The bank will charge you for all deposits and withdrawals. If you are overdrawn, you will pay interest and penalties may also apply.
(b) Overdraft and short-term loan
An overdraft facility is a formal arrangement where the bank agrees that your account may go into debit (overdrawn). It will usually be for a relatively short period of time and the interest rate may be negotiable to some extent. Your overdraft will have a maximum limit that is negotiable. Exceeding this limit will incur additional penalties and interest. There is a charge for setting up the facility.
A short-term loan is usually for a specific item, for example, a delivery van or equipment, and is repayable over a fixed period of time (usually five years). Capital with interest has to be repaid, but you may be able to negotiate the interest rate. You may need a short business plan, with a cash flow projection (CFP), to convince the bank of the need for a loan.
(c) Online banking
Banks encourage customers to bank online. This provides a convenient 24-hour banking service that allows you to do almost anything except deposit or withdraw money. This option allows you to avoid branches and ques. Your local branch will be pleased to advise you on this option.
