Whether you’re new to small business banking or are looking to upgrade your current business account, knowing what’s on the market is essential. Our guide to business banking in Australia will help you compare and understand what’s on offer. So let’s get to it!
What types of bank accounts are available to small businesses?
- Business transaction account (checking account)
Your business transaction account is the account you will use for day-to-day financial operations, like withdrawing and depositing money, paying staff and settling invoices with suppliers. It’s also the account you will use to receive payments from customers. Most business accounts offer overdraft facilities (subject to approval), and qualification criteria varies between banks. Some institutions require proof of business or a minimum deposit. While some business bank accounts are free, many banks charge a monthly fee for the service.
Note: a business bank account is not a personal account. For tax and bookkeeping purposes, banks and accountants strongly recommend that business owners keep separate personal and business accounts.
- Business savings account
A business savings account lets you earn interest on extra funds. It’s considered a revenue stream as it allows you to make money on the assets of your business. Like a personal savings account, your bank will often require notice before allowing you to withdraw your funds. Generally speaking, savings accounts are a tool for longer term planning, as the longer your funds are in the account, the higher the return.
- Business term deposit
Unlike a savings account, a business term deposit has a fixed expiry date and interest rate. This type of instrument lets you deposit money for an agreed period of time (known as a ‘term’) for a set return. If you break your term agreement, banks often charge a penalty fee.
Other products and services offered by banks to business customers include business loans, debit and credit cards, merchant services (credit card processing, reconciliation and reporting, check collection), insurance, cash management (payroll services, deposit services, etc.) and financial advice.
How does a business bank account work?
Unless you’re focusing on saving or depositing capital, the main account your business will use is a business checking account. From hereon, I’ll refer to this as a business bank account.
A business bank account is a facility that protects a business’s capital while allowing it to make transactions. It’s the account you will use to receive payments from clients, fulfil invoices, track business expenses and generally keep your accountant happy. When issuing a business account, most banks will provide a debit card, cheque book and access to online banking. Practices vary among institutions regarding monthly fees, withdrawal and deposit charges and interest rates. Some accounts will come with features like in-branch services and credit cards, while some will not.
For small businesses owners, when comparing business accounts it’s important to spend time on working out what’s important to you, and which features your business needs.
How to find the best account for your small business
Like personal accounts, business bank accounts aren’t all created equal. It’s important to shop around to find an account that matches your needs. Additionally, banks often run promotions for new clients, so be sure to see if you qualify.
- Be clear about what you need an account for. This will guide your research and help you negotiate. Is it for everyday use? Will there be multiple team members using it? Does it come with a credit facility?
- Compare fees. Fee structures can be confusing, so it’s worth it to spend time researching which account offers the best value for money. While some banks offer accounts with no monthly fees, the conditions can be limiting (e.g. no in-branch support). So depending on your business needs, it can make more sense to opt for a paid account.
- Choose an account that suits the size of your business.Business accounts come in all shapes and sizes, catering to the needs of large corporates, small firms and sole traders. Some accounts require a minimum balance to be opened, while some waive monthly fees if a certain balance is maintained. For small businesses, this means working out which account fits your turnover. After all, waived fees don’t mean much if you never keep the monthly balance.
- Think about your credit needs. Some bank accounts come with a credit card, overdraft or business line of credit. If you foresee needing a working capital boost, explore accounts that offer lending services.
- Consider the type of support you require. Some institutions specialise in dealing with corporates, while some are more small business friendly. Consider your physical location. If you think your business will do a lot of transactions in-branch, look at banks you can reach easily. Furthermore, explore banks that don’t limit your amount of in-branch support.
- Think about foreign fees. If you’re a business that trades across borders or makes frequent payments to international suppliers, look at the foreign transaction fees. Some accounts are more suited to international businesses.
- Shop the offers. While it’s true that banks run offers for new customers, if you’ve been with your current bank for a while (even for a personal account) they might offer you a loyalty deal on a new account.
How to open a business bank account in Australia
After you’ve researched your options and chosen the account for you, it’s time to tackle the nitty gritty: how do you actually open it?
Be ready to provide these three things:
- Identification from each of your company’s directors, as well as any shareholders with a stake of more than 25%. It’s likely that the bank will need a couple of forms of ID per person, which can include a passport, driving license or birth certificate.
- A certificate proving the incorporation or registration of your business.
- The ABN/ACN office address your business is registered at.
Note: It is possible to open an account without physically being in Australia, but it’s likely that your capabilities will be limited until you can present your ID and documents in person.
So while the pool of business banking accounts is deep, with some preparation you’ll be able to dive in and find what you need. Take time to consider your business’s needs, and use this as a benchmark for the services you require from a bank – as well as what you’re prepared to pay for. Shop around for offers but don’t be afraid to ask your current bank what they can provide.
Consider alternative finance.
Alternative lenders can unlock growth opportunities within your business.Find out how.
Originally published January 17 2018 , updated August 27 2020