Switching business bank accounts can be a daunting task for many UK companies, but it can also be a wise decision that can lead to better financial management and cost savings – so how do you change and make the switch?
In this guide, we will explore the reasons why businesses switch bank accounts and provide a step-by-step guide to help you make the transition as smooth as possible.
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Switch business bank account guide
- Why switch business bank accounts?
- Offers and incentives
- Steps to switch business bank accounts
- Checklist – remember to contact these people and companies
- Business risks when changing bank accounts
- Is it difficult to change business bank accounts?
- What is the Business Banking Switch Scheme?
- What is the Current Account Switch Guarantee?
- Switching business bank accounts FAQ
Why switch business bank accounts?
There are several reasons why businesses switch their banking provider, including:
- Cost savings: Switching banks can save businesses money in the long run. Many banks offer incentives such as lower fees, interest rates, or cashback rewards to attract new customers.
- Better services: Some banks offer better services, such as online banking, mobile apps, and 24/7 customer support, which can make managing finances easier and more convenient.
- Better credit options: A business may switch banks to access better credit options, such as loans or credit lines, that can help them grow and expand.
- Business needs change: A business may outgrow their current banking provider or find that their needs have changed over time, requiring a new banking solution.
- Poor customer service: Poor customer service can lead businesses to switch banks if they feel their needs are not being met or they are not receiving the level of support they require.
Offers and incentives
When switching your business bank account, it’s worth checking whether your chosen provider is offering any special offers or incentives. Here are some of the most common offers and incentives to look out for:
- Cashback: Some providers offer cashback when you switch your business bank account. This can be a percentage of your average balance or a set amount.
- Fee waivers: Some providers may waive monthly fees or transaction fees for a set period after you switch your account. This can help you save money during the initial period.
- Interest rates: Some providers offer higher interest rates on balances held in your account, which can help you earn more on your money.
- Free banking: Some providers offer free banking for a set period, which can help you save money on account fees during the initial period.
- Additional services: Some providers offer additional services, such as accounting software, online tools, or insurance, which can be useful for small businesses.
Beware hidden catches
It’s important to read the terms and conditions of any offer or incentive carefully before switching your business bank account.
For example, some providers may require you to maintain a minimum balance to qualify for cashback or higher interest rates.
Additionally, some offers may only be available for a limited time, so it’s important to take advantage of them while they last.
Ultimately, while offers and incentives can be attractive, it’s important to choose a provider that offers good value for money and meets your business needs in the long term.
Steps to switch business bank accounts
How to switch business bank account
- Evaluate your current banking needs and compare options
Before switching banks, it is important to evaluate your current banking needs and compare options. Consider factors such as fees, interest rates, services, and credit options when comparing banks.
- Notify your current bank
Once you have decided to switch banks, notify your current bank of your intention to close your account. Your bank may require written notification, so be sure to follow their specific requirements.
- Open a new account
Open a new account with your chosen bank. You may need to provide documentation such as identification, proof of address, and business registration documents.
- Transfer funds
Transfer funds from your old account to your new account. Be sure to update any automatic payments or direct debits to your new account.
- Close your old account
Once all funds have been transferred and any automatic payments or direct debits have been updated, close your old account. Be sure to follow your bank’s specific requirements for closing the account.
- Update your records
Update any records or documentation that may require your new bank details, such as invoices, payroll, and supplier payments.
- Monitor your account
Monitor your new account to ensure that all payments and transactions are processed correctly.
Checklist – remember to contact these people and companies
When a company switches their business bank account, it is important to inform all relevant parties of the change to ensure that payments and transactions are processed correctly.
Here is a helpful list of people and companies that a business should remember to contact and inform of the new bank account details:
| Customers | If you receive payments from customers, you will need to inform them of the new bank account details so they can update their records and continue to make payments. |
| Suppliers | If you make payments to suppliers, you will need to inform them of the new bank account details so they can update their records and continue to receive payments. |
| Payroll provider | If you use a payroll provider, you will need to inform them of the new bank account details so they can update your payroll records and ensure that your employees are paid correctly. |
| HM Revenue and Customs (HMRC) | You will need to inform HMRC of the new bank account details so they can update their records and ensure that any tax payments or refunds are processed correctly. |
| Utility providers | If you make payments to utility providers, such as gas, electricity, or water, you will need to inform them of the new bank account details so they can update their records and continue to receive payments. |
| Insurance providers | If you have insurance policies, you will need to inform your insurance providers of the new bank account details so they can update their records and continue to receive payments. |
| Bank loans or credit lines | If you have bank loans or credit lines, you will need to inform your lender of the new bank account details so they can update their records and ensure that payments are processed correctly. |
| Investment accounts | If you have investment accounts, you will need to inform your investment provider of the new bank account details so they can update their records and continue to receive payments. |
| Accounting software | If you use accounting software, you will need to update your bank account details in the software so that it reflects the change. |
| Your website and marketing materials | If you have bank account details listed on your website or marketing materials, you will need to update them to reflect the change. |
By remembering to contact and inform all of these parties of the new bank account details, businesses can ensure that their payments and transactions continue to be processed smoothly and accurately.
Business risks when changing bank accounts
While switching business bank accounts can have many benefits, there are also some risks that businesses should be aware of before making the decision to switch. Here are some potential risks to consider:
- Business disruption: Switching bank accounts can cause disruption to your business, especially if you have automatic payments or direct debits set up. It is important to plan the transition carefully and give yourself plenty of time to update any relevant accounts and systems.
- Credit ratings: Switching banks can affect your credit rating, especially if you have loans or credit lines with your current bank. You should check with your new bank to make sure that they will honor any existing agreements and that switching banks won’t negatively impact your credit rating.
- Loss of incentives: If you have incentives, such as lower fees or higher interest rates, with your current bank, switching to a new bank may mean losing those benefits. Be sure to weigh the potential cost savings against the loss of any incentives.
- Identity theft: During the switch, there is a possibility of sensitive data or information being compromised, and businesses should take steps to protect their information during the switch. It is important to choose a bank that has good security measures and to follow best practices for online security.
- Unexpected fees: Be aware that there may be unexpected fees associated with switching banks, such as charges for closing your old account or fees for transferring funds. Make sure to read the terms and conditions carefully and ask your new bank about any potential fees before making the switch.
Overall, businesses should carefully consider the potential risks and benefits of switching bank accounts before making the decision to do so. By doing your research and planning carefully, you can minimize the risks and enjoy the benefits of a new banking provider that better meets your business needs.
Is it difficult to change business bank accounts?
Changing business bank accounts can be a bit time-consuming and require some effort, but it is not necessarily difficult. With the help of the Current Account Switch Guarantee, the process has become easier and quicker.
The new provider will handle most of the process, including transferring all regular payments, such as direct debits and standing orders, closing the old account, and transferring the balance.
The entire process usually takes no more than seven working days. However, you should ensure that all necessary parties, such as customers and suppliers, are informed of the new account details to avoid any disruptions to your business operations.
Overall, while there are some potential risks involved, switching your business bank account can be a beneficial move for your business in the long run.
What is the Business Banking Switch Scheme?
The Business Banking Switch Scheme (BBSS) is a program launched by the UK government in 2019 to help small and medium-sized businesses switch their banking providers. The scheme was established to increase competition in the banking sector and make it easier for businesses to find better deals and services.
Under the BBSS, businesses with an annual turnover of less than £25 million and a business account with one of the nine participating banks can apply for financial incentives to switch to one of the participating challenger banks. The incentives include cashback, fee waivers, and other financial benefits.
The participating banks in the scheme include Barclays, HSBC, Lloyds, NatWest, Santander, AIB Group, Bank of Ireland, Clydesdale Bank, and Royal Bank of Scotland. The challenger banks participating in the scheme include Arbuthnot Latham, Metro Bank, Starling Bank, and TSB.
To be eligible for the scheme, businesses must have an existing business account with one of the nine participating banks and must not have more than 50 employees or an annual turnover of more than £25 million. The scheme aims to help businesses save money on banking fees and services and to make it easier for them to switch to a provider that better meets their needs.
The Business Banking Switch Scheme is a voluntary scheme and is available for a limited time. Businesses interested in participating in the scheme should visit the BBSS website or contact their bank for more information.
What is the Current Account Switch Guarantee?
The Current Account Switch Guarantee is a service offered by UK banks and building societies that allows customers to switch their current accounts to a new provider quickly and easily. The service was introduced by the UK Payments Council in 2013 to increase competition and make it easier for customers to switch their bank accounts.
Under the Current Account Switch Guarantee, customers can switch their current accounts to a new bank or building society within seven working days. The new provider will handle the entire switching process, including transferring direct debits and standing orders, closing the old account, and transferring the balance.
The service is free of charge and offers customers the following benefits:
- No disruption to regular payments: The Current Account Switch Guarantee ensures that all regular payments, such as direct debits and standing orders, are transferred to the new account automatically, reducing the risk of missed payments.
- No loss of funds: The new provider will transfer the account balance, including any interest earned, to the new account, ensuring that the customer does not lose any money during the switch.
- Protection from mistakes: If any mistakes are made during the switching process, the new provider will refund any charges and interest incurred, and work with the old provider to correct the mistake.
- Time-saving: The service is designed to be quick and easy, with the switch typically taking no more than seven working days. This can save customers time and hassle compared to switching manually.
The Current Account Switch Guarantee is available to all customers of UK banks and building societies, including individuals, small businesses, and charities.
To switch accounts, customers simply need to contact their new provider and provide their consent to switch. The new provider will then handle the rest of the process, ensuring a smooth and hassle-free switch.
Switching business bank accounts FAQ
There are several reasons why you might consider switching your business bank account. These include:
Better interest rates and fees: You might be able to find a provider that offers lower fees or better interest rates on your account.
Better services: You might find a provider that offers better customer service or additional services that better suit your business needs.
Incentives: Some providers offer cashback or other financial incentives for switching to their services.
Problems with your current provider: If you have experienced issues with your current provider, such as poor customer service or security breaches, you might want to consider switching to a more reliable provider.
Switching your business bank account does carry some risks, including:
Loss of services: If you have any standing orders, direct debits or other regular payments set up with your current provider, you may need to update these with your new provider. This could result in missed payments if not done correctly.
Potential for errors: During the switching process, there is a risk that errors may occur. For example, funds may be lost or your account may not be set up correctly with your new provider.
Time and effort: Switching your business bank account requires time and effort, which can be a burden for busy business owners.
Credit score: Switching your account too often could negatively impact your credit score.
When choosing a new business bank account provider, you should consider the following factors:
Fees and charges: Make sure you understand all of the fees and charges associated with the account, including monthly fees, transaction fees and overdraft fees.
Interest rates: If you have funds sitting in your account, you might want to consider the interest rate on offer.
Services and features: Consider what services and features the provider offers, such as online banking, mobile banking, and other tools.
Customer service: Make sure you choose a provider that offers good customer service and is easy to contact if you have any issues.
Reputation and security: Choose a provider with a good reputation and robust security measures in place.
To switch your business bank account, follow these steps:
Research and choose a new provider that meets your needs.
Open a new account with your chosen provider.
Update any standing orders or direct debits to your new account.
Contact your new provider to initiate the switching process. They will provide you with instructions on how to complete the switch.
Allow up to seven working days for the switch to be completed.
Once the switch is complete, close your old account and transfer any remaining funds to your new account.
After switching your business bank account, you should:
Update any invoices, receipts or other documentation to include your new account details.
Ensure that any standing orders, direct debits and other regular payments are set up correctly with your new provider.
Close your old account and transfer any remaining funds to your new account.
Keep track of your new account to ensure that it meets your needs and that you are not incurring any unexpected fees or charges.
Conclusion
Switching business bank accounts can be a wise decision for many UK companies. By evaluating your current banking needs, comparing options, and following the steps outlined above, you can make the transition as smooth as possible. Be sure to take the time to research your options and choose a bank that meets your specific needs, whether that’s lower fees, better services, or better credit options.