A business account can be perceived as a financial address for every business. Not only does it help establish legitimacy, but it also helps a business owner access specialized tools and services that a regular person would not have access to. Nonetheless, some business owners, especially those running a small business with limited capital, may feel overwhelmed by the costs associated with opening a business account with a certain financial institution. For such business owners, cost efficiency is synonymous with the least expensive alternative. However, the reality is slightly different.
What does cost-efficiency mean anyway?
If we consider the literal meaning, cost-effectiveness can be seen as something that yields high returns on limited investment. The same goes for business accounts. The usual account maintenance fees, cross-border transaction fees, or fees for additional features may seem like a waste of resources at first. However, certain offerings from a specific banking institution can actually be advantageous for a business if they continuously bring higher revenue and profits.
Let’s understand how to choose a cost-effective business account provider.
1. Know your customers: Businesses operating locally may have different banking requirements than those operating internationally. Take multi-currency accounts, for instance. If your business is dealing with international customers on a regular basis, currency exchange rates can compound and result in a loss of revenue. However, it can be avoided if the business account is topped up with multi-currency support. Businesses can choose to change between currencies only when the exchange rate is favorable. In this case, investing in a multi-currency business account would be very cost-effective.
2. Gauge your reward-earning potential: Certain business account providers let account owners redeem rewards for everyday purchases. Start by understanding your business’s most frequent expenses. Is it the regular breakfast supply for your employees or monthly business trips? Choose a business account provider that helps you earn maximum rewards for frequent expenditures. The more rewards you redeem, the less your overall expenses will be. That’s one way to look at cost-effectiveness.
3. Check the security features: Certain business account providers may let you open a business account with lesser fees, but that may come with the below-par security features of your business account. As a business owner, the safety of your financial data should be most important to you. Settling with a business account provider that doesn’t utilize the necessary technologies to safeguard against all threats can lead to your business losing its hard-earned revenue some down the line. Thus, investing in a slightly expensive business account may be a more cost-effective decision.
4. Know your KPIs: Every business has its way of measuring growth. Certain business account providers may offer features that allow the visibility of intricate financial patterns. However, they may be costlier. If the breakdown of certain KPIs is very important for your business, it may be more cost-effective to invest a little extra than later relying on a third-party service that offers unreliable data. Suppose your business has been offering its products or services internationally, and you want to understand which regions are low-performing. While the business account would reflect the overall ins and outs of funds, it may not provide a detailed breakdown of the source of funds. Such level of detail can be retrieved in two ways:
- Using a third-party tool that requires access to your business account and its data.
- Choosing a better business account provider that offers a platform that stores country-specific data directly from the transaction details from your bank account.
The winning choice is quite obvious.
5. Check the financial stability of the provider: Certain banking institutions may offer a business account and additional features at a reasonable price, but they may be prone to financial instability or even failure. This may put your funds at risk later in the future. Financial instability may also lead to your account provider making frequent changes to their terms and policies, which may not always sit well with you. Thus, when choosing the most cost-effective business account provider, look for the financially stable one.
Bottom Line:
Choosing the most cost-effective provider isn’t always the same as choosing the least expensive provider. Every business must carefully consider its requirements, security needs, and future projections before proceeding with a business account provider. Sometimes, paying extra can lead to higher returns.