5 key considerations for SMEs when choosing a business bank account

Resigning to access retirement savings can set you back in the long run

Starting and running a business requires hard work and determination. Most entrepreneurs find themselves having to wear many hats, especially in weeks and months shortly after they begin trading.

And that pressure never really subsides, with attention needing to be given to almost every aspect of the business operations, from sales and marketing to stock control, debtors and creditors, staff management, and a host of other financial and operational priorities.

On a positive note, by choosing the right bank account for your business, you can ease a few of these pressure points by making sure that your business transactional banking and ongoing financial needs are professionally taken care of – so that you can focus more of your time and attention on growing your business, says Andiswa Bata, Co-Head of SME Segment at FNB.

With the impact of Covid, July unrests, struggling economy, there is a growing number of banks offering different solutions to businesses including FinTechs and digital-only banks which makes it even more challenging to choose the right account.

5 key considerations for SMEs when choosing a business bank account

To help our entrepreneurs with this process, we have created the following guidelines:

1. Understand the difference between cost and value.

When choosing a business bank account, it’s imperative that you don’t merely opt for the cheapest option.  Bata explains that there’s a difference between the cost and value of any bank account.

“As an SME owner, you are almost certainly cost sensitive,” she explains, “but it’s far more important to look beyond the marketing hype often associated with these business accounts, and dig deeper to find out exactly what, if any, value they are truly adding.”

While many of the new entrants and FinTech’s compete on the basis of features included in their apps, few actually solve the day-to-day challenges that entrepreneurs face in running their business.

Value adds such as registering your business on CIPC, business support through digital tools such as Fundaba, Invoicing, Accounting and Payroll software integrated to your bank account are just some of the things that have made FNB awarded best SME bank in South Africa and Africa.

2. Don’t just fall for ‘free’. Do your research.

Most banks offer very compelling business banking propositions that come with low, or no, monthly account fees. While, on the surface, these accounts may look like they offer exceptional value – and some do – that’s not always the case.

Khathu Ramoliko, Head of Pricing at FNB Commercial, cautions and recommends looking closer at each bank’s pricing schedules to understand the all-in cost of banking services before choosing a bank account for your business.

“The cost efficiency of a no-monthly-fee business bank account really depends on what type of, and how much, banking you need to do on a day-to-day basis,” he explains, “Other than just the monthly account fee it’s very important to also do a projection of your banking needs and then add up the  per transaction costs to make sure that the basket of transactions you use really do work out cheaper compared to an account which offers value added services and included free transactions at a slightly higher monthly fee.”

While competitor comparisons of baskets of transactions are often done for products aimed at induvial clients these are not common for business accounts and so clients are left to do this exercise themselves.

He adds that, while the headline costs of many bank accounts may appear similar, and some even quoted as free, customers may miss some of the other fees hidden away in the long, complex, and not so easy to find or understand pricing schedules banks have.

So, for example, many banks charge nominal amounts for things like notifications of transactions in your account (AKA inContact at FNB), sending a payment notification to a supplier, subscribing to their rewards programs, withdrawing cash at tillpoints, account dormancy, transfers to own accounts or even debit orders for a service from the same bank, merchant device tally rolls and settlement fees, account confirmation letters and even accessing your bank statements digitally. All these ‘small’ costs eventually add up to a large monthly sum.

“FNB commercial has been prioritizing transparency and simplicity of our charges and more importantly we have done away with many of these fees over the last few years to enable businesses to do more business cost effectively, and the cumulative savings a business client enjoys as a result, more than offset the transparent packaged account fees,” adds Ramoliko.

3. Make sure you can bank the way you want

There’s a massive shift towards digital, platform-driven banking, and that’s a good thing for business owners because it puts full control over their banking firmly back in their hands. For this reason, Bata encourages small business owners to never underestimate the value and cost-effectiveness of convenient banking.

“A strong digital capability should be a top consideration for any business owner when choosing a bank,” she explains, “because not only will digital banking save you money, but it also allows you to make and receive payments quickly and to sweep spare cash in to your investment account, where it can earn better interest rate until you have a need for it.”

4. Get an account that can evolve with your growing business

Given that the end goal of any small business is to grow, it’s essential that your bank account can undertake that journey with it.

Bata says that means it’s vital to spend some time thinking very carefully about your business goals, and then choosing an entry level account that not only helps you achieve them, but can also keep on adding value and functionality as your business expands.

“Don’t be shy to ask the bank consultant about the account options that you could upgrade to in future as your needs and complexity grows,” she explains.

The benefit of banking with a fully integrated financial services provider is that as your business grows and requires card acceptance capabilities, business insurance, specialized finance or forex we are then able to offer these to you seamlessly.

5. Make sure the rewards are… well, rewarding. Rewards programmes have become something of the ‘flavour of the day’ for institutions wanting to promote their offering to individuals in an increasingly competitive environment.

And these rewards programmes are now also being extended to business bank account holders.

“You really shouldn’t be paying any fee to subscribe to for a programme that is supposed to reward you for your loyalty or good banking behaviours,” Ramoliko says, “and a genuine rewards programme needs to offer your business genuine benefits, including, at the very least, the opportunity to use those rewards to offset your banking costs as we do.”

FNB allows businesses to earn up to 15% back on fees on forex, account payments and merchant services device rental, the earned eBucks rewards can also be used to settle monthly account fees.

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