When running a small business, profitability matters and every dollar counts. Statistics show that about 20% of small businesses fail in the first year and almost 70% fail in their 10th year. One of the most common reasons is the inability of the business to become profitable. Various factors affect the profitability of a business and one key aspect is the high banking transaction costs. Business accounts normally accrue higher fees than individual accounts. It’s important for businesses to keep their bank transaction costs minimum to see better chances of being profitable. Here are 5 important tips for small businesses to minimize banking fees.
1. Understand the Banking Charges
It’s important to know how much you spend every month as banking charges. Charges almost apply for every transaction and the different facilities offered by the banks. Different banks have their own fees structure and it’s crucial that you pay attention to it. It’s best to open an account with the bank that offers the lowest account fee and transaction charges.
2. Online banking
Every bank offers online banking facilities these days and it’s best to take full advantage of these facilities. Online banking helps to save time and have the banking details on your fingertips. Generally, banks tend to offer a package of additional services when you opt for online banking. It is advisable that you try to understand the charges, in case you opt for them, that come with it and a good understanding of the services offered.
3. Reduce the number of transactions
Most banks charge their customers on a per-transaction basis. Therefore, fewer the transactions, lesser the banking charges you will pay. Plan ahead in the month on the number of withdrawals and deposits you intend to make and try to combine them into a single or few transactions to save on the banking charges.
4. Alternative payment methods
If your business requires customers to make payments or deposit money into your account, to avoid transaction charges for every single transaction, you can move into the Direct Debit scheme. By opting for this, all your customers’ payments will be credited to your account on a single day (of your preference). In this case, you only need to pay one transaction fee to receive the entire amount. Similarly, when you have to make payments to your vendors, you can opt for the Direct Credit scheme in which you will get billed for your transactions on a particular date.
5. Never use other bank ATMs
Always use the ATM of the bank in which you hold an account. Using your card on other bank ATMs will earn you charges for every single transaction. Remember to consider the number of ATMs in your locality and the accessibility factor when you open a bank account.
6. Stay in Credit
End of the day, it’s important to make sure you maintain the minimum bank balance and stay in credit to avoid any charges. Having too many credit cards will be expensive and increases the usage fees. Be aware of the limits on your card and make sure you don’t exceed the limit.