This year marked the first U.N. Small Business Day (June 27) and another year of the Shop Small campaign.
Australia’s Small Business Minister Michael McCormack says, “Australia’s 3.2 million small businesses employ around 5.6 million people, which is almost half the national workforce.”
These small businesses contribute “around $380 billion annually” to the Australian economy.
That’s a lot of money going in and out of Australian businesses – and it’s worth taking the time to decide where to put that money. Thankfully, you can compare both business savings and transaction accounts using the Canstar website, and we have guides on how to choose a business savings account and how to choose a business transaction account.
In this article, we provide more detail on the fees and interest rates business owners can expect, as well as other business banking trends in 2017.
Business account interest rates
The good news is that businesses overall have more money in the bank this year than last year. The latest RBA statistics show that businesses had $403 billion in deposits in December 2016 compared to $365 billion in December 2015.
But a survey of 500 SME business owners by Suncorp released in June 2017 showed that more than two thirds of business owners have experienced challenges such as financial stress. So how do you make sure that your profits continue to grow by earning interest?
Canstar’s Research team found this year that as expected, interest rates have dropped slightly year-on-year since our last ratings season, thanks, in part, to the last RBA cash rate cut in August 2016.
|Business Savings Account Base Rates: Year-On-Year (% p.a.)|
|1 June 2016||0.55%||1.46%||2.30%|
|1 June 2017||0.50%||1.10%||2.05%|
|Source: www.canstar.com.au Based on savings accounts considered in the 2017 Business Savings and Transaction Account Star Ratings.|
With interest rates quite low, it’s important to shop around for the highest base rates you can find. As you can see from the table below, accounts with a Canstar 5-star rating have significantly higher interest rates than the rest of the market:
|5-Star Vs Market Base Rates (% p.a.)|
|5-star rated accounts||1.65%||1.82%||2.05%|
Based on savings accounts considered in the 2017 Business Savings and Transaction Account Star Ratings.
Interested in a business savings account? The table below shows business savings accounts available for online savings accounts with a balance of $50,000, sorted by star rating (highest to lowest):
Business bank account fees
Our Research team found the following average fees on business transaction accounts in 2017, with the maximum monthly account-keeping fee being as much as $22/month:
|Transaction Account Fees|
|Monthly Account-Keeping Fee||$0.00||$8.45||$22.00|
|ATM Withdrawal (Own ATM Network)||$0.00||$0.49||$2.00|
|Point of Sale (POS)||$0.00||$0.41||$1.60|
|Internet Transaction (Same Institution)||$0.00||$0.11||$1.60|
|Internet Transaction (Different Institution)||$0.00||$0.25||$2.00|
|Branch Cash Deposit||$0.00||$0.59||$2.50|
|Branch Cash Withdrawal||$0.00||$1.09||$3.00|
Fees are current as at 1 July 2017 for transaction accounts considered in Canstar’s Business Savings and Transaction Account Star Ratings 2017.
It’s worth looking for a transaction fee-free account if you can, since the average fees can add up over time, especially for the accounts with some of the higher fees on the market. The following business transaction and savings accounts offer unlimited free transactions for the majority of common transaction types:
|Business Savings & Transaction Accounts
With Unlimited Free Transactions
|ANZ||Business Extra Account|
|Bank of Sydney||Business Advance Cheque Account|
|Bankwest||Business Zero Transaction Account|
|Citi||Ultimate Business Saver|
|First Option Credit Union||Business Cash Hub|
|NAB||Business Everyday Account*|
|Source: Canstar Business Savings and Transaction Accounts Star Ratings, 2017
*For the NAB Business Everyday Account, there is a $0/month account-keeping fee for access to unlimited electronic transactions, or a $10/month account-keeping fee applies to also have access to unlimited cheque transactions and branch visits.
The table below shows 5-star rated business transaction accounts available for businesses that make fewer transactions, sorted by company name:
Could your business save money by going digital?
It certainly depends on your business needs and financial situation, but the fact is that a lot of businesses are going digital, making more electronic transactions.
The past year has seen a significant shift in the way customers make payments, with digital wallets becoming more prevalent. But businesses are also moving towards making their payments and other transactions via mobile banking or online banking.
MYOB’s December 2016 Business Monitor survey found an increasing number of businesses conduct almost all of their banking online:
- 66% of businesses use online banking
- 28% accept instant payments (e.g. EFTPOS, Apple Pay, PayPal, etc.)
- 32% do accounting and bookkeeping online
Canstar’s research has found that doing the business banking online can result in paying fewer fees. Many accounts we rated in 2017 offer unlimited free electronic transactions (e.g. online transfers, eftpos, direct debits, etc.), only charging for cheques and/or branch transactions. See above for our list of accounts with unlimited free transactions.
Apart from business banking methods, getting a business online via a website or social media can also really help the bottom line, according to MYOB’s latest survey:
- Increased sales: Around 1 in 4 businesses reported an increase in revenue and income from having a website (28%) or social media (24%).
- Increased customer base: Nearly half of all businesses saying that having either a website (46%) or social media presence (43%) generated more customer enquiries and leads.
- Increased sales in the pipeline: 50% of businesses with a social media presence and 47% of businesses with a website reported that they had more work or sales lined up for the March 2017 quarter.
With these stats in mind, it’s not surprising that more than 1 in 4 businesses (26%) said they intend to focus over the next 12 months on sales of their products and services online, compared to 22% last year.
Another 1 in 5 business operators (22%) said they intend to increase investment in online marketing and advertising.
This was seen as being most important for start-ups, with 37% of start-ups planning to increase investment in selling products and services online and 28% planning to increase their online marketing.
Social media remains an area where there is a significant gap for businesses to fill – only 47% of SMEs have a social media presence, but 79% of consumers use social media regularly, according to the 2017 Sensis Social Media report.
56% of consumers pay attention to ads they see on social media (Sensis, 2017).
Social media advertising is therefore becoming more important, with 26% of small businesses and 35% of medium-sized businesses now using social media advertising in 2017, a solid increase from last year (20% and 27% respectively).
Don’t have a social media presence yet? Check out our hottest tips for getting started.
Federal Budget 2017 for businesses
This year’s Federal Budget held some helping measures for Australian businesses:
- Cuts to the small business tax rate to 27.5% the lowest level in many decades
- Extended the instant tax deduction for business assets for another year
In spite of this, business confidence in the government dropped into the negatives in the March 2017 quarter – the lowest level since Turnbull became Prime Minister in 2015.
Late payments impacting Australian businesses
Late payments have been impacting businesses across the country, to the point where the Australian Small Business and Family Enterprise Ombudsman called for legislation to regulate payment times to small businesses.
In April 2017, the Ombudsman released findings showing that almost half of all small businesses in Australia have more than $20,000 owing to them from late payments, and 14% have more than $100,000 owed to them.
In total, small businesses in Australia had $26 million in unpaid invoices owed to them. This is obviously concerning, given that Ombudsman statistics show 90% of small business failures are due to poor cashflow.
An international study has shown that Australia is lagging behind the rest of the world when it comes to paying businesses on time. Australian businesses in the survey were paid on average 26.4 days late, compared to the next ‘slowest’ countries, Mexico (18.6 days late) and South Africa (16.5 days late).
The main culprits for paying late in Australia are large and multi-national businesses. Research by the RFI showed mid-size Australian businesses owe $8 billion in outstanding payments to suppliers, with more than $2 billion currently overdue.
Ombudsman Carnell says this trend of not repaying debts on time means suppliers are effectively using other businesses as a cheap form of finance.
“Small businesses should never have to act as a bank for big businesses, helping to finance multinational companies,” said Carnell.
The Ombudsman is calling for legislation that would set a maximum payment time for business-to-business transactions of 15 days from July 2018 onwards.
Source: Australian Small Business and Family Enterprise Ombudsman
Until then, businesses may benefit from setting aside profits in a high interest earning savings account, for use in times when invoices are slow in arriving. Canstar can help you there, comparing business savings accounts available in Australia: