Bank charges are often a bone of contention amongst business owners and any way to reduce what many see as a non-productive expense should be welcomed.
In this post, we’re looking at our 10 favourite ways to reduce bank charges for all businesses.
#1 – renegotiate your tariff
It often comes as a surprise to business owners but many banks have a negotiable tariff. This is especially the case if you set up a businesses account when you started out but have grown since.
All aspects of the tariff are negotiable and banks are happy to do this when they see that a business has a bright future ahead.
You’ll often find that a bank will have different levels and your business may have moved up a notch and consequently it is always worth having a chat to see if this is the case.
#2 – Shop around
Even if you haven’t grown significantly during the last few years it is always worth shopping around because new ‘challenger’ banks come on stream all the time.
Certainly, with the advent of internet-only banks, there has been downward pressure on the charges that banks make and so it is always worth looking at the new guys on the block.
Don’t dismiss the older, more established banks though as they often have a change of heart.
Business is cyclical and you’ll find that whilst one particular bank wasn’t looking to attract business customers a few years ago, they have had a change in emphasis and now are offering very attractive options to bring in new businesses.
Often banks will offer free banking for a period and so it is always worth looking to see if a move would benefit you.
#3 – Junk your manual processes
Like any company, banks have been facing pressure to reduce costs and so they really hate manual processes.
This means that to make them less attractive for customers to use and to make them more profitable for the bank they tend to price them higher than automated services.
For example, it takes a lot of effort to process a cheque so don’t write them for payments out, move to electronic payment methods.
You can also look at weaning your customers off cheques too by offering them new payment methods such as bank transfers, BACS, Direct Debits and Card payments.
Make sure that you reduce any cash that you bank because these tend to be charged at a much higher rate than any other type of deposit.
Always use internet banking rather than going into a branch as you will often find that counter transactions are regularly charged at a higher rate.
#4 – Reduce the volume of transactions
Bank tariffs are often charged on the number of transactions rather than the value.
If we take BACS payments, each will attract a per-transaction charge for each statement line so avoid making several payments to your suppliers when you could amalgamate into one single payment.
Give your customers the option to pay in one transaction rather than making a per invoice payment and look at ways of amalgamating payments into one statement line by using external services.
#5 – Make sure you get value for your money as soon as possible
If you deal with a large number of transactions, especially if you are an eCommerce company, trading online, then you can often find that your money takes a suspiciously long time to get to your account from your merchant service provider.
This can lead to you incurring overdraft charges or losing out on some interest on your account. At the very least it means that the cash isn’t available for you to use in your company.
Look for payment provider that can offer you value in your account as soon as possible like the UTP Group who have options to get credit card payments into your account on the same day.
#6 – Don’t simply accept the bank’s overseas transfer rate
Businesses that make or accept payments in currencies other than their own often assume that they have to accept the processing fee that their bank charges but nothing could be further from the truth.
In fact, this is one of the ways that banks make good money from their customers by charging a fee for the transaction and then giving their customers a terrible currency exchange rate.
If this applies to you then have a look around for a specialist company that will not only charge you a low rate but that will be able to give you an excellent exchange value for your money.
#7 – Go paperless
Banks often make a higher monthly charge for customers that take paper statements, notifications and letters.
You can reduce this by swapping your traditional method for a fully online account. This means that your monthly charge will drop and you’ll end up spending less on filing cabinets!
#8 – Don’t run consistently high balances
If you have a lot of cash sitting in a current account that pays little (if any) interest then it makes sense to move it to a better place.
Called ‘treasury management’ in the business, this is simply a case of looking around for a home that pays interest on your money.
Do be careful that you don’t lock up money that you might need to use at short notice though.
#9 – Make sure you actively manage your cash flow forecast
Probably the best advice for people who want to reduce their bank charges is to produce and actively manage a cash flow forecast.
This will help you to understand where the cash is likely to get low and push you into an expensive overdraft or, conversely, where you will have a lot of cash sitting and not earning interest.
#10 – Maintain a relationship with a business manager
Many banks have specialist business account managers and their job is to help their clients to get the best out of their bank.
A relationship manager will be the person you talk to in order to get your tariff reviewed or if you have other problems with the bank.
They will also have first notice of any changes that might be happening, especially around special offers and new features that the bank is bundling together.
Many banks provide their clients with free services such as accounting software, training webinars, networking and much more and your relationship manager will be the gateway to accessing these.
So although they may not reduce your charges as such, they will give you much more value for the money you do pay.
Managing your business bank account is the key.
Smart business owners know that to get the best out of their bank accounts they need to regularly review the situation.
Making sure that you know what the market is offering, who has the best offers and what additional free services your bank has all help to make sure your bank charges are minimised so diarise a review every 6 months or so and in the meantime keep an eye on the market.
By using our tips we think you’ll find that you can reduce your charges and make sure you are getting great value.