Interest-bearing bank accounts for small business

June 19, 2024
9
minutes to read
by
Justin Bohlmann
Table of Contents

For small businesses, managing funds effectively is crucial. Even more crucial is making your money work for you! One way to enhance this is through interest-bearing bank accounts. These accounts allow businesses to earn interest on money that would otherwise just sit idle. It's a smart and simple way to boost earnings with minimal effort.

Are you tired of your business bank account just sitting there, doing nothing? It's time to turn that cash into an asset! Interest-bearing bank accounts in Australia offer a simple yet powerful way to boost your bottom line. Instead of letting your money stagnate, it can be actively working for you, generating extra income while you focus on running your business.

Interest-bearing accounts not only offer financial benefits but also provide tools to streamline business operations. Online management, easy access, and customer support are just some of the perks. By choosing an account that aligns with their financial goals, small businesses can ensure steady growth and efficient financial management.

Key takeaways

  • Interest-bearing accounts help small businesses earn extra income.
  • Various account options are available depending on business needs.
  • Choosing the right account includes comparing interest rates, fees, and features.

What is an interest-bearing bank account?

An interest-bearing account is a powerful tool for any business owner looking to make their money work harder. It's a bank account that rewards you in the form of interest for depositing your business funds, essentially paying you for keeping your money with them. This interest is calculated as a percentage of your account balance, and over time, it can significantly boost your company's financial standing.

Why should you consider one?

  • Protection against inflation: With prices steadily rising, the value of your money can erode over time. Interest earned on these accounts helps to counteract this effect, ensuring your hard-earned cash retains its purchasing power.
  • Financial stability: An interest-bearing account serves as a financial buffer for your business. The accumulated interest can be a safety net for unexpected expenses, slow periods, or investment opportunities.
  • The power of compounding: Over time, your interest earnings generate even more interest, leading to exponential growth. This can significantly boost your company's financial health over the long term.

Essentially, it's a mutually beneficial relationship. The business bank leverages your funds for its operations, and in turn, you receive a share of the profits through interest payments. This consistent, passive income stream can benefit your business' financial strategy.

Types of interest-bearing accounts

Interest-bearing accounts for small businesses help manage cash flow while earning interest. There are two main types of accounts: business savings accounts and term deposits.

Business savings accounts

Business savings accounts are designed to help businesses grow their funds while maintaining easy access to money. These accounts typically offer competitive interest rates and flexibility.

Businesses can use these accounts for daily transactions, making them ideal for managing cash flow. Features often include Internet banking, allowing businesses to monitor and manage their accounts easily. The interest earned can vary depending on the balance and the bank’s policies.

For example, providers like NAB offer features to connect accounts seamlessly with bookkeeping tools. This integration helps track income, manage invoices, and reconcile transactions automatically. Many banks provide options to earn interest on idle funds while maintaining liquidity.

Thriday all-in-one financial management platform
Thriday all-in-one financial management platform

Term deposits

Term deposits are another option for businesses looking to earn interest. These accounts require locking funds for a set period, ranging from a few months to several years.

Remember, any length of time is a long time to be without control of your funds as a small business.

Term deposits usually offer higher interest rates compared to business savings accounts. The fixed nature of these accounts means that the interest rate remains constant throughout the term. This makes term deposits a good option for businesses that can afford to set aside funds without needing immediate access.

Businesses can choose different terms based on their financial strategy. For short-term needs, a term deposit of six to twelve months might be suitable. If a business can commit funds for a longer period, it may opt for multi-year terms to maximise interest earnings.

Banks like NAB provide specialised term deposit options, catering to various business needs and offering competitive rates.

Choosing the right account for your business

When deciding on a business savings account, consider features, benefits, interest rates, and account fees. Compare providers carefully to get an account that meets your needs.

Account features and benefits

When selecting a business savings account, it's important to focus on account features and benefits. Features like seamless integration with bookkeeping software, automatic transaction reconciliation, and real-time income and expense tracking make managing finances easier. For instance, NAB Bookkeeper, like Thriday, offers tools for creating, sending, and managing invoices, which can be invaluable for small businesses.

Look for accounts that offer mobile and online banking options for easy access and management. The ability to connect the savings account with a transaction account can simplify fund transfers. Additionally, check if the account comes with a free trial period for certain features, as this can save money initially.

Interest rates and account fees

Interest rates and account fees significantly impact the benefits of a business savings account. Higher interest rates allow businesses to earn more on their idle funds. For example, accounts with tiered interest rates reward higher balances with better interest, encouraging savings.

It’s crucial to review any fees associated with the account. Some accounts have no monthly fees, while others may charge based on balance or transaction volume. Be aware of fees for withdrawals, deposits, and other transactions, as these can add up and reduce the account’s overall benefit.

Comparing providers

Comparing providers is essential to finding the best business savings account. Look at banks like Thriday, NAB, and others, as each offers different features, rates, and fees. Sites like Finder can help compare offers from various banks.

When evaluating providers, review their product disclosure statements and financial services guides to understand all terms and conditions. Consider if the provider caters to your specific industry or business size. For example, some banks may offer specialised accounts for small businesses with favourable terms and dedicated customer service.

By thoroughly comparing providers, businesses can select an account that meets their specific needs and offers the best value.

Read the fine print

Often, interest-bearing accounts come at a cost, and that cost is usually:

  • Loss of control of your money for an extended period of time - term deposits.
  • Loss of functionality, which means efficiency, which means you have less time.

Examples of the fine print:

"Cannot be linked to a card - Macquarie"
"Account balances above $250k only - IMB"

Maximising your business’ savings

To make your money work for you, it's important to focus on earning higher interest rates but ensuring the benefits outweigh the loss of control and functionality. These strategies ensure that your funds are working efficiently for you and maximising returns.

Strategies for higher interest

Businesses should seek out high-interest savings accounts to get the best possible returns on their savings.

It's also critical to shop around and compare rates frequently as they can vary. For example, Finder has a range of business savings accounts that could suit different needs.

Consider term deposits for higher rates. But remember, your funds are locked for a set period. A term deposit can be a great way to ensure that larger balances, such as those over $1,000,000, are gaining significant interest.

Maintaining the minimum balance

Maintaining the minimum balance requirements is crucial to avoid fees and penalties. Many high-interest accounts or term deposits have specific balance requirements that must be met. For example, keeping your balance above a certain level, like $1,000,000, can sometimes yield higher interest rates or additional benefits.

Separating surplus funds from operational cash can help manage these requirements. This approach helps maintain the required balances and maximises interest earnings without interrupting daily operations.

Fee structures and cost considerations

Understanding how fees and charges work for business bank accounts is essential for any small business owner. This includes different types of fees and extra charges that might apply.

Understanding fee types

Fees can vary widely depending on the bank and the specific account type. Account-keeping fees are common and may be charged monthly or annually. For instance, Thriday offers $0 monthly fee banking for up to 10 accounts in one platform, whereas other banks can charge anything from $10 per month per account.

Transaction fees are also typical, which can be a set amount per transaction or based on the volume of transactions. Some banks charge for each transaction above a certain limit. For example, after 30 transactions in a month, fees apply to additional transactions.

Overdraft fees are another consideration. These fees apply if you spend more than the balance in your account. Additionally, statement fees may be charged for paper statements or ad hoc statements, sometimes costing around $2.50 per statement.

Evaluating additional charges

Beyond regular fees, small business owners need to be aware of additional charges that can affect their costs. Some business accounts may have charges for international transactions or using ATMs outside of the bank’s network.

Banks may also charge fees for certain services like cheque processing. For instance, the lodgement of each cheque can incur a fee, such as $0.60 per item, for certain accounts.

Furthermore, there are often charges for additional features that cater to specific needs, like higher interest rates on large balances.

Understanding these fee structures allows small businesses to choose the best account for their needs and minimise unexpected costs. By evaluating all potential charges, businesses can make more informed decisions and manage their finances more effectively.

Technological tools for account management

Modern technology like Thriday has simplified how businesses handle their bank accounts. The major technological tools that help are AI integrated with banking to automate accounting and tax.

Thriday is the industry leader.

Electronic banking services

Electronic banking services allow businesses to manage their finances efficiently. With platforms like Thriday, businesses can perform transactions anytime. They enable easy access to account information, transfer funds, and pay bills. Using the Thriday app, businesses can review their accounts on the go, scan and save receipts and send invoices and quotes. The all-in-one financial management platform is a game changer!

Thriday

Using a debit card linked to these services provides the convenience of cashless transactions. Electronic banking terms and conditions should be reviewed to understand fees and security measures. These services streamline daily financial tasks, reducing the need for physical bank visits.

Integrating banking and accounting software

Integrating banking and accounting is unique to Thriday as Australia's first all-in-one financial management platform.

As money comes into your accounts, the transactions are categorised, and a chart of accounts is assigned.

As money leaves your account to pay expenses, you snap a pic of the receipt, the transaction is reconciled and tax is calculated.

You can see your tax and cash flow position in real-time.

You can even automate the distribution of funds through your accounts to put your business budget on autopilot. This is perfect for Profit First!

Transaction limits and accessibility

Small businesses need to be aware of transaction limits and the accessibility of their bank accounts to ensure smooth day-to-day operations. Knowing daily transaction limits and how to access funds and branch services is crucial.

Thriday offers unlimited transactions with no transaction fees for local transactions and low fees for international transactions.

Understanding daily limits

Some banks set daily transaction limits to protect against fraud and to manage their operations.

Typically, these limits cover various transactions, including online transfers, cheque deposits, and ATM withdrawals. Daily limits ensure that account holders can operate their businesses without interruption but need to be mindful not to exceed these limits. This requires careful planning, especially for businesses with high transaction volumes.

Businesses should communicate with their relationship managers regularly. They can often provide guidance and may adjust limits temporarily if necessary. Being aware of daily transaction limits helps businesses avoid unexpected interruptions or fees.

Access to funds and branch services

Having easy access to funds and branch services is vital for businesses. Many accounts offer efficient methods to handle money, such as online banking, mobile apps, and Quick Deposit services. For example, Thriday has partnered with Australia Post so you can use the Bank@Post service across over 3,000 post offices across Australia which effectively act as the bank branch.

Branches provide essential services like cash deposits, assistance with account management, and detailed guidance on banking products. Having access to a local branch and a dedicated relationship manager ensures that businesses can address issues promptly.

It's also important to understand the costs and fees associated with these services. For instance, frequent use of paper statements can incur additional charges. Therefore, knowing the full range of accessible services and associated fees can help businesses make informed decisions.

Understanding both daily transaction limits and the accessibility of funds and branch services ensures businesses maintain efficient financial operations and avoid costly disruptions.

Legal and compliance issues

Compliance is crucial for small businesses using interest-bearing bank accounts. Understanding terms and conditions, along with ensuring target market determination compliance, helps avoid legal problems and maintain financial stability.

Adhering to terms and conditions

Small business owners must be familiar with the terms and conditions set by their banks. These terms cover fees, interest rates, transaction limits, and other important details. Misunderstanding these can lead to unexpected charges or restricted access to funds.

Banks must also provide transparent information about their business investment accounts. This includes both the general information and the specific terms. It is essential to read these documents carefully before opening an account. Knowing what you’re agreeing to helps avoid surprises and ensures legal compliance.

Adequate record-keeping is also vital. Keeping detailed records of all transactions and communications with the bank can be very important. This can help resolve disputes or misunderstandings, ensuring your small business remains compliant with the bank's policies.

Target market determination compliance

Target market determination is another important factor. Banks must identify and document why a product is suitable for a specific segment of customers. For small businesses, this means ensuring the chosen accounts meet your business needs and financial goals.

A bank's target market determination should be reviewed to ensure it aligns with your business activities. This involves looking at aspects like turnover, employee numbers, and typical transaction types. Mismatched products can lead to financial complications.

By understanding and adhering to the bank’s target market determination, small businesses ensure their accounts are tailored to support their operations. This alignment not only helps avoid legal issues but also optimises financial management.

Careful attention to these legal and compliance requirements plays a significant role in maintaining a smooth banking relationship for small businesses in Australia.

Advanced business banking products

Exploring business credit cards and investment account options can offer significant benefits for small businesses, including customisable spending solutions and higher returns on savings. These products can transform the way businesses manage their finances and grow their assets.

Business credit cards

Business credit cards provide a convenient way to manage expenses and improve cash flow. They often come with expense tracking features, making it easier to monitor spending and categorise transactions for accounting purposes. Many banks offer business credit cards with reward programs, which can include cash back, travel points, or discounts on business supplies.

Some cards feature introductory low or 0% interest rates on purchases, providing temporary relief on cash flow. Additional benefits such as extended payment terms and employee cards with set spending limits help maintain control over company spending.

Business investment account options

Business investment accounts are designed for companies seeking to earn higher returns on idle funds. Banks offer options like high-interest savings accounts and term deposits, which can yield better interest rates compared to standard business accounts.

A variable interest rate account can provide flexibility, with rates that fluctuate based on the market, potentially offering higher returns. On the other hand, fixed-term deposits can offer a guaranteed rate of return over a specified period, which can be ideal for businesses with longer-term savings goals.

Online management tools and automatic transaction reconciliation are often included to simplify account operations and integrate seamlessly with existing business banking activities, helping SMEs manage their investments efficiently.

Frequently asked questions

Choosing the right interest-bearing bank account is crucial for small businesses looking to maximise their savings and manage their funds efficiently. This section addresses common questions regarding the best options available in Australia.

What are the best interest-bearing bank accounts for small businesses in Australia?

Small businesses in Australia have various options for interest-bearing accounts. Some top choices include Macquarie and ANZ, which offer competitive rates and useful features for managing business funds.

Which Australian banks offer the highest interest rates for business savings accounts?

They change and vary, so it's hard to say at any given time, but make sure you read the fine print as they aren't always as good as they seem.

Are small businesses eligible for interest-bearing accounts?

Yes, small businesses are eligible for interest-bearing accounts. These accounts are specifically designed to help businesses grow their savings and manage excess cash effectively.

How do interest rates for business savings accounts compare among Australia's top banks?

Interest rates vary among top banks. For example, Macquarie offers competitive rates, while other institutions may have different structures based on balance tiers. Comparing rates directly can help businesses choose the best option for their needs.

What features should be considered when choosing an interest-bearing account for a small business?

Key features to consider include interest rates, account fees, ease of access to funds, and additional banking services.

Can a small business benefit from high-yield savings accounts, and what are the requirements?

High-yield savings accounts can significantly benefit small businesses by providing higher interest returns on saved funds. Requirements typically include maintaining a minimum balance and making limited transactions to qualify for the higher rates. This can help businesses boost their savings efficiently.

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DISCLAIMER: Team Thrive Pty Ltd ABN 15 637 676 496 (Thriday) is an authorised representative (No.1297601) of Regional Australia Bank ABN 21 087 650 360 AFSL 241167 (Regional Australia Bank). Regional Australia Bank is the issuer of the transaction account and debit card available through Thriday. Any information provided by Thriday is general in nature and does not take into account your personal situation. You should consider whether Thriday is appropriate for you. Team Thrive No 2 Pty Ltd ABN 26 677 263 606 (Thriday Accounting) is a Registered Tax Agent (No.26262416).

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