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5 ways that freelancers can avoid business bank charges

There's no getting away from it. Literally all freelancers, and particularly those working outside IR35 and running their own business, will need to conduct their financial transactions with the help of a bank.

The problem with most business bank accounts is that they seem to charge you for even the most minor of transactions.

Whether it's paying in a cheque or making a BACS payment, that arbitrary 39p 'charge' always seems to accumulate over the month and eventually add up to a quite sizeable amount.

I think the banks call it 'sundry income'. I prefer to call it "daylight robbery". After all, most of these services are free to personal account holders so why are they chargeable for business customers?

Whatever your view, we've come up with 5 ways of avoiding business bank charges whilst still getting the best possible service.

1. Choose your bank wisely

It's often said that you change your husband or wife more frequently than you change banks. What this generally means is that once you've gone through the administrative headache of getting everything setup, it's often too much of a pain to bother switching.

Find out what rates are available at the time, but not just the short term carrots (or incentives) that are used to entice you to join. Look at the bigger picture and perhaps even do a bit of research about which banks offer the best rates over time. Once you've narrowed your search, it's then time to consider customer service and in particular your access to a business banking or relationship manager.

It's imperative that you have a good relationship with the bank and its staff as you can often reclaim or at least reduce the odd bank charge with a bit of persuasion.

2. Pay attention to your direct debit transactions

Although this is one easy way for the payment of bills and a very convenient method of conducting your business transactions, it is also a great way of avoiding business bank charges.

It only takes 5 minutes or so to set-up and regular direct debit which could mean the difference between a string of bank charges or a well managed cash flow.

3. Negotiate an overdraft facility

Always be aware of your bank balance and avoid going into an overdraft if you can help it. If you really do need the extra capital, you should be able to agree an overdraft facility with your bank but be sure never to exceed the agreed amount.

Remember if the bank can charge you, they usually will - and overdraft penalties have a habit of being ludicrously high. Depending on your relationship with the bank, sometimes they can be informed of an anticipated breach in your overdraft limit and the fees negotiated. Sometimes not.

4. Use standing orders

Like direct debits, the use of automated payment facilities such as standing orders are an easy way of avoiding business bank charges. If you're organised enough to know what should be going out of your account and when (let's face it, it's not rocket science), you should set up a series of regular fixed payments that you and your bank have agreed on.

5. Settle bank liabilities first

If your limited company or business has taken out a loan with the bank, settle the monthly interest payments before anything else. You can often negotiate longer payment terms with you business creditors or suppliers but not your bank. It may seriously damage your credit rating if you continuously miss loan repayments as well as making another large dent in your cash flow with additional late payment fees.

If certain things cannot be avoided and you do get lumbered with a series of unfair business bank charges, try taking a look at the bank's terms and conditions - they're often subject to interpretation and could be used in your favour.

If you really do fancy a fight, you could always have a go at reclaiming or perhaps seeking compensation for your troubles. This however can be a long drawn out process and it's often wise to avoid being hit with the charges in the first place.

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