Business bank accounts 101: A guide for small businesses

Choosing the right banking partner can significantly impact your trajectory-it's not just about where you keep your money but about gaining a strategic ally in your business journey. Business banking is different from your personal account, where you buy groceries or pay your rent. A business bank account is like a financial toolbox, built to handle everything from paying suppliers and employees to tracking your income and taxes.

But finding the right account can be tricky. There are many options, each with different fees, features, ad rules. This guide will help you find a bank account that fits your small business. Read on!

Key takeaways

• Business banks provide essential services for managing and growing business finances.
• Account types, fees, and customer service quality are vital business considerations.
• Regulatory knowledge and financial tool accessibility are key to business banking efficiency.

Business vs. personal banking

Business banking and personal banking differ significantly, reflecting the distinct financial needs of companies versus individuals.

Transactional differences

Business finances are more dynamic than personal ones. You're juggling supplier payments, employee salaries, customer invoices, and more. Business accounts are built to handle this high volume and complexity, offering features like batch payments, detailed transaction reports, and tools to manage multiple users or authorisations.

Credit facilities

Our business dreams are bigger than your personal credit card limit. Whether you need to invest in new inventory, expand your team, or have a cash flow hiccup, business banks offer a range of credit solutions – commercial loans, lines of credit, and even equipment financing – tailored to your company's size and goals.

Specialised banking services

Business banking goes beyond deposits and withdrawals. It's about merchant services that simplify payment processing, cash management tools that optimise your working capital, and even foreign exchange services if you're doing business across borders. These specialised tools can streamline your operations, save money, and give you a competitive edge.

And the list of benefits continues beyond there. Business banking often includes dedicated relationship managers who understand your industry and can provide personalised advice. You may also gain access to networking opportunities and educational resources through your bank.

Additionally, having a separate business bank account is crucial for maintaining clear financial records, simplifying tax preparation, and protecting your personal assets.

Types of business bank accounts

Now that you know why it's important to separate your personal account from business expenses, it's time to go deeper. Businesses have various options to manage their funds effectively. Each type of account offers unique features tailored to different financial needs and goals.

Transaction accounts

A business transaction account serves as the nucleus of daily financial operations. It facilitates a plethora of transactions, such as payments to suppliers, receipt of customer payments, and effective cash flow management. For instance, our top picks of the best business bank accounts in Australia outline an option with little to no hidden charges and the ability to seamlessly manage domestic and international transactions.

Features

• Unlimited electronic transactions
• Monthly fee structures, often with a $0 option
• Access to business debit cards, compatible with digital wallets

Who this is for: Startups, small businesses, freelancers, sole proprietors, and any business that needs a reliable account for everyday transactions

Savings accounts

Business savings accounts are designed to help businesses earn interest on surplus cash. These accounts typically reward higher balances with higher interest rates, encouraging businesses to save. Businesses may consider linking their savings account with a transaction account for easier funds management.

Benefits

• Interest-bearing accounts to grow business reserves
• May offer bonus rates for higher balances
• Often, they come with introductory rates or special offers

Who this is for: Businesses with consistent cash flow and a desire to grow their savings over time. Established businesses are looking to maximise returns on surplus funds.

Term deposits

A term deposit account is suitable for businesses looking to lock away funds for a fixed period to earn a higher interest rate than a savings account. It is a low-risk investment vehicle that provides predictable returns. Businesses can take advantage of varying terms and interest rates, as seen with accounts that offer a compelling fixed interest rate for a defined term.

Advantages

• Fixed interest rates for the duration of the term
• Terms can typically range from one month to five years
• Offers certainty of return with minimal risk

Who this is for: Businesses with extra capital they want to invest for a fixed term. Companies looking for a low-risk investment with predictable returns.

For more information on the different types of business bank accounts, visit this helpful resource: https://www.thriday.com.au/blog-posts/4-types-of-business-bank-accounts

Our Recommendation

A combination of a transaction and savings accounts is a good starting point for most small businesses. The transaction account will handle your daily financial needs, while the savings account will help you grow your funds and prepare for the future. As your business grows and your financial situation evolves, consider adding a term deposit to your portfolio to diversify your investments further.

For small businesses, sole traders, consultants, and freelancers

We highly recommend Thriday as it offers a business bank account with zero monthly access fees. This can be a significant advantage for businesses looking to minimise expenses. Thriday also provides a range of features designed to streamline financial management, including unlimited electronic transactions, access to business debit cards, and integrations with digital wallets like Apple Pay and Google Wallet. Thriday also allows easy cash deposits at Australia Post via Bank@Post, and their Bill Manager feature simplifies bill payments with automated scheduling.

For larger companies

For larger companies with more complex financial needs, NAB Bookkeeping is a strong option. NAB offers a comprehensive suite of business banking services, including cash flow management tools, merchant services, and foreign exchange services. They also provide dedicated relationship managers who can offer personalised advice and support. Additionally, NAB's robust online banking platform and mobile app make it easy to manage your finances on the go.

By considering your business's specific needs and exploring the offerings of different banks, you can find a financial partner who empowers you to achieve your goals and thrive in today's competitive landscape.

How to set up a business bank account in Australia

Setting up a business bank account is a critical step for new businesses. It involves specific eligibility criteria and different account types to suit various business needs.

Eligibility and documentation

To open a business bank account in Australia, entities must meet the eligibility requirements set by financial institutions. Common entities such as sole traders, partnerships, trusts, and associations must provide specific documentation during the application process.

A sole trader must provide personal identification documents and Australian Business Number (ABN). In the case of a partnership, the partners must furnish a partnership agreement, personal identification for all partners, and the ABN or Australian Company Number (ACN) if applicable.

Ready to take the plunge? Check out Thriday's step-by-step guide on how to open a business bank account online: https://www.thriday.com.au/blog-posts/how-to-open-a-business-bank-account-online

How to choose the right business bank account

Lengthy approval processes, hidden fees, and impersonalised service can leave entrepreneurs feeling frustrated and underserved. The rise of digital banking and artificial intelligence (AI) is changing this landscape, offering a more efficient, transparent, and tailored approach to business finance.

Today's entrepreneurs have access to a wider range of banking options than ever before, from established financial institutions with a digital twist to innovative fintech startups that cater specifically to the needs of small businesses. But how do you navigate this abundance of choice and select the right partner for your financial journey?

Here's what to consider:

Align with your business needs

Ensure the bank offers the essential services you need, such as online and mobile banking, bill pay, wire transfers, debit cards, and check issuance. Consider if you'll require additional accounts like savings, money market, or retirement accounts.

How many transactions do you typically make each month? If the volume is high, look for accounts with unlimited electronic transactions and minimal fees per transaction. If you're a startup, prioritise banks with tailored services for your unique needs, like access to capital, cash management tools, automated invoicing etc.

Do you need bookkeeping tools, invoicing capabilities, or expense tracking? If so, consider platforms like Thriday or NAB Bookkeeper that combine banking with these essential features. Thriday also offers a $0 monthly access fee, making it an attractive option for cost-conscious businesses.

Consider the interest rates & fees

To maximise your earnings, compare interest rates on relevant accounts (e.g., checking, savings). Remember to factor in any associated fees. Be aware of banks offering high introductory interest rates on savings accounts. These rates often expire after a certain period, so have a plan for where to move your funds once the introductory period ends.

Check the transaction fees. These are charged per transaction, such as deposits, withdrawals, and transfers. Look for accounts with a generous number of free transactions or consider bundling transactions to minimise costs.

Pro Tip: Don't just focus on the headline interest rate. Calculate the total cost of the account, including all fees, to determine the true value it offers your business.

Check the bank's accessibility and customer support

How important is 24/7 customer support to you? Do you prefer to manage your finances primarily online, or do you need in-person branch access?  Look for a bank with responsive and knowledgeable customer support through multiple channels (phone, email, online chat).

If you anticipate needing personalised advice and assistance, consider business banks that provide a dedicated community like Thriday Circle.

Other features you need to consider

Business cards

Business cards, such as the Visa Business Debit Card and corporate cards, offer businesses a seamless monetary management tool.

The Visa Business Debit Card is embraced for its direct access to company funds without the need for credit, supporting real-time tracking of business spending. On the contrary, Corporate Cards are typically used for credit facilities. They offer a grace period on payments and often come with rewards programs.

• Visa Business Debit Card: Direct debit from business accounts is widely accepted.
• Corporate Card: Credit facility, potentially includes rewards.

Businesses may choose based on their transaction volume, the nature of their expenses, and the control they require over their spending.

Electronic payments

Electronic payments, featuring platforms like BPAY and PayID, represent the crux of modern transactional convenience.

BPAY allows businesses to streamline bill payments with a unique reference code, efficiently managing outgoing expenses. It's an easy and secure way to handle bills via online banking platforms.

Meanwhile, PayID caters to simplified receiving of funds using a distinctive identifier such as a phone number or email address, offering immediacy in transactions.

• BPAY: Unique reference codes for bill payments.
• PayID: Receive payments with a unique identifier.

The choice between the two depends on whether the business's focus is on efficient billing solutions or on rapid receiving mechanisms. They can be components of a comprehensive payment solutionssuite designed to optimise the cash flow and financial management of a business.

Cash flow and transactions

Effective cash flow management and transaction handling are crucial for maintaining a healthy financial status. They allow businesses to track income accurately, regulate expenses, and ensure that invoices and cheques are processed efficiently.

Companies must maintain an up-to-date record of their business accounts to manage cash flow. Balances must be monitored to reflect the true financial position at any given time.

This entails routinely recording all income and expenses, thereby providing a clear overview of the company's financial health.

Tools and techniques like cash flow forecasting can predict future financial positions, enabling businesses to make informed decisions.

For instance, if a cash flow forecast indicates a surplus, a business might decide to make a capital investment. Conversely, a forecasted deficit might suggest a need to secure additional funding.

Effective cash flow management also involves scrutinising outgoing funds to avoid unnecessary expenditures.

Keeping track of expenses is not just about recording them; it is about analysing spending patterns and identifying potential savings.

Regular reviews of expenses can often reveal hidden costs or opportunities for discounts and negotiations with suppliers.

Transaction handling

Transaction handling requires meticulous attention to ensure all financial movements are correctly accounted for.

When dealing with invoices, prompt issuance and follow-up are key to maintaining steady cash inflow. Payment terms should be clear, and businesses might consider offering a variety of payment options to customers to speed up the collection process.

Businesses should use reliable banking services tailored to their needs to manage both inflows and outflows. AI-integrated business bank accounts often come with features that aid in the smooth processing of transactions and provide valuable insights into cash flow trends.

Which are the best business bank accounts in Australia?

Choosing a business bank account can feel like searching for a needle in a haystack. With so many options and features, getting lost in the details is easy. But don't worry, we've got your back! Here's a breakdown of some top contenders in the Australian market, so you can find the perfect match for your business needs:

Thriday business account

Features & Benefits: Unlimited transactions, integrated invoicing, effortless expense tracking, tax preparation, user-friendly interface, no international fees, real-time financial insights

Fees: $0 monthly access fee.

Limitations: Newer platform, fewer integrations with third-party tools (compared to Airwallex).

Who we recommend it for: Startups, freelancers, and small businesses prioritising affordability, simplicity, and integrated financial management tools.

Read how Thriday works.

Airwallex business account

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Features & benefits: Multi-currency accounts (23+ currencies), global FX and international payments at interbank rates, virtual and physical debit cards, expense management, seamless Xero integration, and instant account activation.

Fees: No monthly fees, no international transaction fees, no withdrawal fees. When converting currencies, only a small FX margin (0.3% or 0.6%).

Limitations: Primarily online banking with limited physical branch presence.

Who we recommend it for: Businesses with high international transaction volume, frequent currency conversions, and those who prioritise low fees and digital banking.

See our side-by-side comparison review of Thriday vs Airwallex.

ANZ bank business extra

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Features & benefits: Unlimited electronic transactions, syncs with Xero/MYOB, Apple/Google/Samsung Pay, overdraft facility, ANZ Falcon security.

Fees: $22 monthly fee, 3% international transaction fee, $0.80 fee for staff-assisted transactions, merchant deposits, and cheque transactions, $5 international ATM fee.

Limitations: The monthly fee includes only 50 free transactions, high international fees, and no local international payments (SWIFT only).

Who we recommend it for: Established businesses with high transaction volumes and need extensive features and services.

See our side-by-side comparison review of Thriday vs ANZ.

Commonwealth Bank business transaction account

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Features & benefits: There is no minimum balance requirement, and the Visa Debit Card syncs with Xero/MYOB, Apple/Google Pay, real-time banking alerts, and no transaction limits.

Fees: Switchable $0-$10 monthly fee, $3 per assisted transaction, $15 overdraw fee, $5 + 3% international ATM fee, 3% international transaction fee.

Limitations: High international fees, no local international payments (SWIFT only), and only one business debit card per account.

Who we recommend it for: Larger more complex businesses with >10 emplyees. Businesses seeking flexibility with no minimum balance requirements and those prioritising digital banking.

See our side-by-side comparison review of Thriday vs Comm Bank.

NAB business everyday account

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Features & Benefits: NAB Business Visa Debit Card, free assisted transactions, no ATM fees.

Fees: $10 monthly fee.

Limitations: This account has fewer features than other accounts, high international fees, and no local international payments (SWIFT only).

Who we recommend it for: Small businesses with low transaction volume who prioritise a simple and affordable account.

The future of business banking

The future of business banking is bright, with technology and innovation opening up new possibilities for entrepreneurs. As AI evolves, we can expect even more sophisticated financial tools and services that will further streamline operations, improve decision-making, and drive business growth.

By embracing these advancements and partnering with a forward-thinking financial institution, you can position your business for success in the digital age. Remember, the right bank account is not just a place to store your money; it's a strategic asset that can empower your business to reach its full potential.

Frequently Asked Questions

This section covers the essential queries individuals have when managing the financial facets of their business, with detailed insights into opening accounts, requisite documentation, and service comparisons.

Which financial institution offers the best mobile app for business banking?

Evaluating mobile apps for business banking involves considering user experience, functionality, and service integration. Thriday offers a highly-rated mobile app that facilitates various business banking operations.

What features should I look for when choosing a bank for business banking?

Key features include transaction fees, interest rates, online and mobile banking capabilities, customer support, and additional services like overdrafts, merchant facilities, and integration with accounting software.

How do I compare business banking services provided by banks like Thriday NAB, Macquarie and CBA?

When comparing business banking services, focus on account features, service accessibility, fee structures, and customer satisfaction reviews. For specific services offered, refer to each bank's website. For comprehensive guidance, contact customer support.

Can I open a business bank account if my business isn't registered yet?

It depends on the bank and your business structure. Some banks allow you to open an account with an ABN/ACN application reference number, while others may require full registration.

Can I get a business credit card with no credit history?

It's possible, but your options might be limited. Some providers offer secured business credit cards that require a deposit as collateral.

How do I switch my business bank account if I'm unhappy with my current one?

Research and find a new bank that better suits your needs. Open a new account, transfer funds and direct debits, then close your old account after settling all payments.

What happens if my business becomes dormant or inactive?

Most banks charge a monthly fee for inactive accounts. Contact your bank to discuss options for dormant accounts.

How can I protect my business bank account from fraud?

Use strong passwords, enable two-factor authentication, be cautious of phishing scams, monitor your account statements regularly, and report any suspicious activity to your bank immediately.

Are there any government-backed incentives or guarantees for business bank accounts?

Yes, the Australian Government offers a Financial Claims Scheme that protects deposits up to $250,000 per account holder per bank in case of a bank failure.‍