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How much are you paying in banking charges? If you unable to put a figure to this right away, the chances are that you are paying too much. Let us consider a typical shop taking £100,000 per year, and paying all the takings into a convenient local bank on a daily basis, as advised by countless guides to running a successful shop. Let us guess that the shop also accepts 10 cheques per week as well. Let us then pay for all stock using cheques. Assuming a total of twenty suppliers and each being paid monthly, this will mean 240 cheques per year. The rest of the bills we will assume to be on monthly direct debit. Let us say that there are ten of these, giving us 120 automated payments every year. We will assume that the account stays just in credit at all times. So what will all this cost?
Taking the figures for Barclays, we have
352 credits at 75p = £264
+ £100,000 @ 50p per £100 = £500
+10*52 cheques credits @ 25p = £130
240 cheques at 54p = £129.60
120 automated payments at 54p = £64.80
This gives a grand total of £1088.40
Well, you may ask, are these contrived figures? Have I chosen a particularly bad account? Far from it. Stray into unauthorised overdraft on occasion and you could well see these figures soar. Start to accept debit cards and you will incur additional banking charges in addition to the merchant charges. There will be daily credits to your account and monthly charges for the merchant service. Banks run these merchant services and so they generate additional credits and debits to rack up the charges. Why are Switch credited separately to the rest. An additional daily charge. Look at the detailed to bill to see what is going on. Why is the terminal rental separate to the merchant charges. At just the basic one credit a day and one debit a month rate, this adds
363 credits at 15p = £54.45
12 debits at 54p = £6.48
A new grand total of £1149.33
How is it that Banks can charge so much when personal customers get frequently away with free banking? There are two reasons. The first is that there is not enough competition as business customers are far less likely to change account than individuals. The second is that business customers never discuss the charges. Ask your friends in neighbouring shops what they are paying if you want to confirm this.
What should you do then to reduce these charges and put some of this money into your pocket where it belongs.
1. Use your Cash & Carry to accept your cash. Make friends with the cash desk and they will provide you with change as well.
2. Pay van men with cash as well. They may grumble at first, but after the first week, they will accept it as normal.
3. Use a personal account. It needs to be in your name, not in the name of your business, but other than that, you will have no trouble, providing that you do no pay in too much cash. Use different branches, and they will be less likely to notice how regularly you pay in cash. Open your account in a far away branch that you never use. This does not have to be your only account in the short term.
4. Negotiate with your bank. They way well offer you lower rates just because you have complained.
5. Change your business bank. If you are starting off, a number of banks will provide a free account, with some restrictions. With negotiation, they will accept that you are new even if you are only moving. A few will offer free banking permanently. Try Alliance & Leicester for a good deal. Visit www.businesslink.gov.uk to get some helpful advice and a very useful resource for comparing banking charges across the whole industry. This one will save you a great deal of time going from bank to bank.
6. Make use of a professional. One to try is the Banking Liaison Group at www.bankexperts.co.uk. Give John Page a ring on 0845 6585 100. These firms work on a commission that is a percentage of the annual saving, so they will find the larger retailer a better proposition. They normally achieve their savings by negotiating with the customers existing bank. They will also work on saving money on merchant accounts, so gather your figures for banking and merchant services before speaking to them, and I am sure you will find them helpful.
Whatever you do, never ignore bank charges. If you ever hit hard times, it is the bank that will bring you down, Their charges and interest will be a major charge on your assets. In many cases, the greatest charge. They are not your friends. They are a business that profits from your custom.
Dave
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Thursday, 6 September, 2007