Finance costs can be a “set-and-forget” expense. However, both your commercial needs and the available products continually change, so reviewing your accounts on a regular basis can potentially save your business thousands. Here are five ways to reduce your small business banking costs.
Review your transaction account fees
Monthly fees on a business transaction account can be a sneaky drain on your money. CANSTAR?s 2015 research of business transaction accounts has found that fees can range from
- zero to $137 per month for High Transactors (approximately 200 transactions per month) and
- zero to $50 per month for Low Transactors (approximately 50 transactions per month).
- Zero to $22 per month for cash management accounts
With more and more business banking being done online, small business owners could be paying fees for account features they no longer need or use. You can compare and find a better business transaction account here, or you can preview a snapshot of the current market offerings below in our comparison table. Please note that this table is formulated based on less than 95 transactions per month, and sorted by our star rating, A-Z.
Review the interest rates on your business loans
Irrespective of the type of loan a business uses, their individual “risk margin” will determine the interest rate that is charged.
Most lenders will apply a base rate and then add an individual risk margin to determine the total interest rate for a business customer. The bank will take into account a number of “risk” factors in determining what margin they will apply to the business loan. These include the profitability of the business, turnover, business owners experience in that industry/business and loan to valuation ratio.
So factors such as paying down debt, increasing sales volumes or profitability and good management can potentially reduce the risk margin for your business. If your circumstances have changed for the better, ask your financial institution to review your risk margin and the interest rate you are paying. Read more about business loans online.
Review your business credit card
Most businesses operate with at least one credit card and with dozens of products to choose from it?s essential to assess how the card is generally used. For example, if you pay off the balance of your credit card each month then a long interest-free period will be useful; if you always carry over a balance at the end of each month (revolve) then a low interest rate will be more important in reducing your costs.
As a rule of thumb, look for these features, based on your usage type:
- Lots of transactions, card always paid off in full: Look for a long interest-free period and a good rewards program
- Low volume of transactions but card always paid off in full: Look for a long interest-free period, low annual fee
- A high volume of transactions and carrying an ongoing debt: look for the lowest interest rate possible
- Low volume of transactions and carrying an ongoing debt: Look for a low interest rate, low annual fees
At time of writing, business credit card interest rates range from 9.99% to 20.74%; you can compare business credit card rates here, or preview the current market offerings below in our comparison table. Please note that this table has been formulated based on low rate cards, and is sorted by purchase rate (lowest to highest).
Review your merchant facility
The merchant fees a small business pays are usually determined by the number of transactions processed each month, the average amount of each transaction and the mix of debit and credit card transactions. So if your EFTPOS sales volumes have increased noticeably or if your situation has changed, ask your financial institution to review your current service fees, or get a quote from another institution and ask your current provider to match it.
There are some amazing merchant facilities available.
Ask for a dedicated small business manager
The needs of a small business are different to the needs of a consumer or a large business, so it makes sense to ask for a manager who has the experience and understanding to match your needs with the services available. As such, look for an institution that offers specialist small business staff and services such as:
- Dedicated small business managers
- A dedicated small business call centre with extended operating hours.
- Understand your transaction account fees and take steps to change your behaviour or find a better account.
- Review interest rates on loans. If you have paid down debt, increased your sales or profitability then ask your bank to review your risk margin.
- Review your business credit card and ensure that the features match your spending habits.
- Review your merchant fees. Ask for your fees to be reviewed particularly if your EFTPOS sales have increased.
- Ask for a dedicated small business manager
Streamlining your business operations can both save you money upfront and over the long term.