Here’s Why SMEs Should Consider Having Dedicated Business Bank Accounts

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A business bank account is different from our personal bank account. Opened under your business’ name, it is typically used to track your financial transactions, as payments can be made and received using its name.

There are no restrictions on businesses having more than one bank account. In fact, this article will go on to list some reasons why having dedicated business bank accounts can be useful.

While the benefits of having a business bank account are readily apparent, SMEs may consider specialised bank accounts to further segregate your funds according to specific needs and requirements. When you do this, understanding the various types of business bank accounts, including account requirements and fees, will assist you in determining which bank accounts your business will benefit from.

3 Benefits Of Opening Dedicated Business Bank Accounts

Having dedicated business bank accounts may benefit companies in the following ways:

#1 Helps To Keep Money Separated

As a business, you may have various inbound and outbound transactions that could be on a routine or ad hoc basis with various parties. Lumping these records together would make your bookkeeping process more tedious and time-consuming when you need to track any of these transactions.

Having dedicated business bank accounts would enable you to organise separate accounts for different purposes, like one for your operational cash flow, another for capital and/or investment expenses, and one for receivables. You may even hold your company’s cash reserves in another separate savings account that potentially earns better interest.

#2 Able To Take Advantage Of Different Perks Offered By Different Bank Accounts

Different types of business bank accounts offer features that may fit different needs for your business. To take advantage of various benefits they offer individually, you could open more than one business bank account.

For example, a business bank account that is only denominated in Singapore dollars may impose certain limitations or higher foreign exchange fees when you need to transact in foreign currencies.  A multi-currency business bank account may offer highly attractive foreign currency exchange rates, amongst other perks. In the same vein, you may find the functions offered by the multi-currency business account lacking for your Singapore Dollar transactions.

If your company regularly deals in foreign currencies, you may want to have both Singapore dollar and multi-currency business bank accounts to enjoy the different benefits of each account.

In other instances, you may find a business bank account that offers you access to complementary products, such as debit cards which may offer cashback for your business spend or even beyond banking solutions that help you digitalise your business. Certain business accounts may also be specifically catered to store your cash reserves – giving you better returns.

#3 Provides Better Security

Security is an important consideration when having dedicated business bank accounts. Having a single business bank account increases the risk of financial loss or account downtime when faced with a possible cybersecurity attack.

You can never be too cautious when it comes to protecting your money, especially when it involves various parties and frequent transactions. You could spread your risk by opening dedicated business bank accounts that limit your risk based on their purpose.

In the unfortunate event that you are a victim of fraud, having dedicated bank accounts will also limit your losses within a single account.

Read Also: Why Open A Business Account With A Bank?

Different Types of Business Bank Accounts Available for Your Company

Depending on the demands and requirements of your company, the following kinds of business bank accounts are available:

Singapore Dollar Business Current Account

Doing business in Singapore, you would need a primary Singapore Dollar-based current account to deal with the bulk of your transactions done in the local currency.

In general, you could choose between a business account that caters to younger and/or smaller business or one that is meant for more established companies.

For many small business owners, an account like the OCBC Business Growth Account can be suitable. It charges a nominal monthly account fee of S$10 (waived for the first 2 months), with a lower initial deposit and monthly balance requirement of S$1,000 but in exchange, the account gives you  unlimited free FAST and GIRO transactions to scale up. The account also comes with a free OCBC Business Debit Card which earns up to 1% cashback on your everyday business spend.

On the other hand, a more established business can opt for the Business Entrepreneur Account Plus. Though there are no monthly account fees, the initial deposit and minimum balance are higher at S$30,000. It also comes with some costs, such as a S$0.10 per GIRO transaction.

Regardless of which account you choose, you have access to convenient digital business banking features with OCBC Velocity via the OCBC Business App. You would be able to use a suite of Business Financial Management tools to create and send e-invoices, track and manage cash flow, and initiate bulk payment and collection.

Multicurrency Business Account

If you have significant business dealings with suppliers and customers in foreign currencies, then you may want to consider an additional business bank account that supports multicurrency.

For instance, the OCBC Multi-Currency Business Account supports trading in 13 major currencies: USD, EUR, AUD, JPY, GBP, CNH, HKD, CAD, NZD, CHF, SEK, DKK, and NOK. There is no initial deposit, set-up fee, or minimum balance requirement imposed. In fact, the S$10 monthly account fee would be waived if you also have any of the two OCBC Singapore dollar Business Bank Accounts.

With the Multicurrency Account, you would be able to transact directly in the currency of your choice at a favourable exchange rate and avoid losing money due to currency conversions.

Time Deposit Accounts

If your business has sufficient cash reserves or you are simply setting aside cash for it to be used at some point in the future, you could opt for a time deposit account to maximise the returns on your cash instead of leaving it in the low-interest yielding business current bank account.

Local banks, such as OCBC, offer both Foreign Currency Time Deposit and Singapore Dollar Time Deposit accounts. For the Singapore Dollar Time Deposit, you could deposit any amount between S$5,000 and $999,999 from a wide range of tenors. If the deposits aren’t redeemed upon maturity, they would automatically be renewed for the same amount of time at the current interest rate. This would save you the trouble of keeping track and worrying about renewing your time deposits.

Banks also understand that businesses may not have visibility on when they may require to use their funds. This is why investment periods are typically kept flexible, instead of trying to lock businesses in for 12-months or even longer.

Read Also: 5 Things You Never Knew Your Business Banking Account Can Do (Besides Basic Transaction Services)

Business Accounts for Foreign Companies

In a globalised world, companies may look to expand overseas to gain a bigger market share and grow their presence. In the same token, there are also opportunities for businesses to go into joint ventures and/or acquire a foreign company.

In such instances, a company that may not be based or incorporated in Singapore, may need a business bank account here. Such foreign businesses can still work with a local bank for their banking needs.

Most local banks would offer some type of solution. For example, OCBC’s Business Foreign Accounts is available in various currencies, and with a low minimum balance requirement. A one-time fee of US$2,000 is required to open this account, which includes a monthly account fee of S$50 for a Singapore Dollar Chequing Account and a US$50 monthly account fee for a multicurrency business account.

How Many Bank Accounts Should You Have for Your Business?

Obviously, you need at least one business bank account that can handle your operational financial transactions, which include making payments and receiving collections in the local currency. Taking into consideration the different needs and requirements of the business, this could be either the Business Growth Account or the Business Entrepreneur Account Plus to manage your Singapore dollar accounts.

How many more business bank accounts you should have will depend on the business banking needs of your business. As mentioned, a common second business bank account you may need, given the cross-border nature of modern businesses, is a Multicurrency Business Account to complement your main Singapore dollar account. This could help you be more cost-effective as opposed to making currency conversions in non-foreign currency-supported bank accounts.

If you want to keep your retained profits or cash reserves separate from your day-to-day operations, earning a better interest on your cash is preferred – as opposed to paying a monthly maintenance fee on the account. A Singapore Dollar Time Deposit may serve that purpose while at the same time making your cash work harder for you with better returns.

The purpose of having dedicated business bank account is to streamline your financial operations, not make it more complicated. You should ensure that you only open a new business bank account if it is complementary to your existing accounts – and serves a real business need.

You should also bear the account charges in mind when selecting the different business bank accounts.

Read Also: Guide To Opening A Business Account For Your Start-Up In Singapore

Need Financing Support During This Period?

Enjoy fast access to funds and receive your loan approval status instantly when you apply online with OCBC.

For SMEs that are just six months into operations, secure up to S$100,000 with the OCBC Business First Loan . If your SME is above two years old, secure up to S$700,000 with the OCBC Business Term Loan – good for funding business operations or expansion. Terms and conditions apply.

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