Small Business Accounts | Small business accounts | Discussion forum

I don't think there are any no-fee business chequing accounts.

Banking services are not actually free for the banks to provide. Businesses, small and large, are expected to pay for those services and incorporate the cost into what they charge their customers.

For business accounts, there's even a charge for deposits!

I think a small business should consider whether or not it actually needs a business chequing account. There's no legal requirement that a sole proprietorship has to use one.

CRA doesn't care what account the cheque for taxes due is drawn on. Suppliers don't care much either, as long as the cheque doesn't come back NSF! Clients can be instructed to issue their cheques to the owner, who is appointed the accounts receivable agent.

It will become an issue once the business is big enough to start clearing 20 to 30 cheques a month through a personal bank account. The bank will notice and ask that the customer open a business account.

By that time, I think the business would be able to afford the $30 to $50 a month in fees for a business chequing account. They can also order their cheques elsewhere, like ASAP Cheques ($56 for 600 business cheques), instead of from their bank.

COJO said

…While there is no obligation for small business to have a chequing account, they still have to pay employees, make government remittances, pay suppliers, etc. Using a personal chequing account is not necessarily appropriate.
If a small business is incorporated, it is even more necessary to open one.
Banks have small business over a barrel either way!
…

One can do all those things from a personal account, provided the number of transactions isn't large.

Try it: Use a personal cheque to pay a supplier. They will cash the cheque. Same with payroll remittances. Not a problem, unless the remittance is over $25 million. I've used my personal credit card to pay for things instead of a business credit card. No complaints from the suppliers.

If there's a significant number of employees and suppliers, then it sounds like your business is not that small.

Loonie said

You can, theoretically, do a lot of these things from a personal account.
But it's not the person or business that is cashing the cheque that poses the problem. The problem is that your bank has explicit rules about not doing so. As I recall, Tangerine says they reserve the right to shut down all your accounts if you do this - for example.

True, I've seen the same term from Royal Bank and CIBC. That's leverage in case someone tries to deposit and write a large number of cheques for a business through the unlimited plan of a personal account. That term can also be used to stop large regular deposits of cash into a personal account to escape the $2 fee per $1,000 for cash deposits.

Loonie said

… Before that, we were paying through the nose at a CU and doing very few transactions..

If it's agreed that many people don't really "need" business accounts, then why do the banks push them into having them? The obvious reason is that they make more money that way.

I don't accept the argument that a small business can "afford" these fees just because they are clearing a certain number of cheques. … You don't really get much, and the bank gets your money, especially when you have few transactions.

… It's about time they recognized that businesses come in different sizes and that dinging a start-up with $500-600/year is not good for our economy.

Of course: The banks do make more money from the business accounts. That's why they push them. One can also say they don't subsidize them as much, by not waiving fees for cheque clearing and cash handling.

When I looked into business accounts years ago, the fees weren't that much. I think I looked at business accounts at TD Bank and Royal Bank.

The fees were definitely more than I was used to paying on my personal accounts, which had fees waived for a minimum balance. I remember the business cheques being expensive. But, I don't think the fees were going to $500-600 per year or $40 to $50 each month, unless I had a large number of transactions.

I just had a look at Royal Bank's RBC Business Essentials $6 Small Business account. $1.12 per credit or debit. 22¢ per item deposited. $2.50 per $1,000 of cash deposited. $6/month for the minimum fee.

For about $45/month, one would be doing something like the following:

1. Write 20 cheques = 20 x $1.12 = $22.40
2. 4 weekly deposits. Each deposit is 10 cheques and $1,000 cash. = 4 x ($1.12 + 10 * $0.22 + $2.50) = $23.28

The revenue in cash alone would be $4,000 per month. I think such a business can easily afford the $45/month in transaction fees.

I don't think the $45/month fee in my example is excessive for what the bank processed each month: 20 cheques written, 40 cheques deposited, and $4,000 of cash deposited. That's way above the regular account use a person is expected to have.

True, the significant gross receipts doesn't mean that there's enough at the end of each month to give the business owner a reasonable income. However, I think it is a bad omen to have worries about $45/month in banking fees with $4,000 of cash plus 40 cheques coming in each month.

Profits would be thin and the situation would be precarious. The $500/year in accounting and business tax return fees would also seem to be excessive.

Loonie said

Your example is hypothetical, Norman. There might be only 2 or 3 larger deposits that come in, and so on, but they plan to ding you according to the size of the deposit, as if it were more bother to them simply because of its size. There could easily be 10 cheques written or less, depending on the nature of the business and credit card usage. This is reminiscent of our discussion about the merits of RSPs. It depends on your circumstances.

In that case, it won't be $45/month. The minimum fee is $6/month for that particular RBC Business Essentials business account. The fees are on the number of cheques written, number of cheques deposited, number of branch visits, and amount of cash deposited.

If instead, each month, ten cheques were written (10 x $1.12) and three in-branch deposits were made (3 x $1.12) to deposit a total of 30 cheques (30 x $0.22) and $1,000 of cash ($2.50), then the transaction fees would drop to $23.66/month.

Accounting fees must be way more than $500/yr. by now. Many charge almost $1000 now just for an uncomplicated return for a married couple - which is less work! However, in that case, one can choose to do it oneself. It's harder to get along without a bank.

Knowing that I'm saving $500 to $1,000 each time makes doing my own tax returns more bearable.

Yes, profits may very well be thin and the situation precarious. … They may stick with it, accepting a smaller wage because they would feel badly about firing their staff and because they have a product or service that is needed and the business has potential. It takes a lot of work to make a "go" of it. And the reality is that the vast majority of small businesses fail. To keep going is quite an accomplishment, considering the odds.

…It's time the big banks got on board with the solutions, especially as they keep laying people off. They offer generous start-up deals for new graduates, immigrants, seniors (of which I am one who benefits). They need to get more realistic about small business' needs and circumstances.

It is definitely not easy to run a small business and succeed. But, like our personal bank accounts, there are lots of choices. A business owner can shop around just as we can for our personal high-interest savings accounts.

Like that from in-branch financial advisors, I think one needs to be wary of advice from those small business advisors too. They may pitch some $50/month account "to know what you'll be paying each month" instead of a pay-as-you-go account that can cost less.