Cutting the cost of banking
Bank fees cost fashion business owners millions, with many considered too high, overly complicated or just unfair. But the reality is that Australia’s “user pays” system of banking is here to stay, so what can you do to save your fashion business money?
*Shop around: Every bank has its own fee structure which you should compare against the needs of your business. Banks also individually assess the risk in lending to your business to determine the interest rate on your loans, which can vary significantly from bank to bank.
It’s important to look at all the offerings available and find the account, fee and interest rate package that gives you the best value for money. Don’t forget that this should be reviewed regularly, in light of changes to the fees and charges you’re paying.
*Negotiate: Contrary to the perception of many businesses, bank fees and charges are usually negotiable. Whilst the actual reductions achieved will vary from bank to bank, the main reason customers don’t receive them is because they don’t ask. Using an offer from a competing bank to identify fees that are too high is one successful method to reduce fees and charges incurred.
*Know your accounts: Your business could save hundreds of dollars by simply taking the time to read up on all the fees and changes that could be applied to your accounts, taking particular note of how these could be avoided.
*Avoid penalty fees: Fees for an overdrawn account, dishonoured cheque or direct debt often cost upwards of $50 each. To avoid these unnecessary fees, make sure that you know your account balance and are aware of upcoming cheques and direct debit withdrawals.
*Minimise debt: It’s surprising how many businesses have credit funds in one bank account earning minimal interest, whilst incurring unnecessary interest charges on an overdraft at the same time. If debt is a necessity, keep it to a minimum by regularly transferring credit funds in other accounts to reduce the loan balance, or even consider consolidating the accounts.
*Be prepared: If you think that you're bank account is likely to become overdrawn, be pro-active and seek approval for an overdraft facility. This option is usually cheaper than the penalty fees for an unauthorised overdrawn account; it’ll also avoid the embarrassment of having your payments potentially dishonoured.
*Internet banking: Most businesses have discovered the convenience and ease of internet banking. The other big benefit is that it’s generally cheaper than traditional banking through your local branch or using cheques. Whilst many may need to visit the bank occasionally, by making payments and transferring funds online you’ll save incurring needless fees.
*Keep account: Track each bank fee your business is charged and ensure that no fees are being charged to your account that you don’t understand and expect. It may only be $5 here and $10 there, but they quickly add up.
Your bank can make an enormous contribution to the long term success of your business, assisting funding, cash management and payment transfers. But as with any other expenses in your business, be sure that you always get the value you expect and don’t pay more than necessary.
By Matthew Nolan
Matthew Nolan, managing director of Provident Cashflow has over 18 years experience in banking and finance, specialising in providing finance to SMEs.