5 ways to reduce your business banking costs
British businesses spend more than £2.3 billion every year on banking charges.
This is according to new research from CashFlows, which looked at the per-transaction and monthly fees being levied by the banks.
Banking charges are an irritating and potentially expensive fact of life – but many firms could reduce the amount they shell out with relatively little effort. We have compiled five top tips to help you cut your banking costs.
1. Understand the charges
You cannot hope to reduce your banking charges unless you are confident that you understand them first. A startling 16 per cent of respondents to the CashFlows research said that they did not know how much they spend each month on banking charges. Your first step should be to investigate your current bank’s fee schedule. Make sure that you pay particular attention to the charges associated with the transactions you carry out most frequently. Could you reduce your costs by changing the way in which you make or receive payments?
2. Reduce your transactions
Many banks charge their business customers on a per-transaction basis. You can therefore reduce the amount you pay by reducing the number of transactions that you carry out. Plan ahead in an effort to cut the number of deposits or withdrawals that you need to make. Consider waiting, and taking a larger sum of cash to the bank, rather than making several trips (while remembering to ensure that any cash is stored safely). Similarly, if you know that you may need cash in the next few days, consider holding onto it rather than making a deposit and then a withdrawal.
Where possible, try to encourage automated electronic payments. The charges for receiving BACS or Faster Payments tend to be lower than those associated with cheques. In addition electronic payments tend to take less time to clear, helping to improve your cashflow in the process.
4. Stay in credit
This is, of course, not as simple as it sounds. Many firms rely on credit to finance their day-to-day operations – but this quickly gets expensive. Try to draw up accurate cashflow forecasts in order to maximise your chances of staying in the black. If you are forced to borrow, make sure that you take some time to investigate the most cost-effective options. Credit cards and overdrafts tend to be particularly expensive. You might want to consider alternatives like invoice financing in an effort to reduce your costs.
5. Shop around
Finally, remember the importance of shopping around. As with every service, it is important that you regularly consider your business banking arrangements. Be prepared to shift providers if you find a better deal elsewhere. Most banks will offer an introductory period during which transactions are free. You may be able to significantly reduce your costs by ‘hopping’ between these.