ARE YOU BEING SERVED?
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Small businesses need to get the best banking services for their money. New codes of conduct have forced the banks to come clean about what they offer and what they charge.
• Treasury investigations into banks' relationships with small business customers have resulted in a code of conduct being produced at the request of the Chancellor.
In the league of published charges for regular transactions Lloyds comes highest at 75p per item, Barclays charges 66p and Nat West 64p. Lowest of the big four is the Midland's Enterprise tariff (for business with a turnover below k250,000pa) which works out at 60p for paper items such as cheques, and 50p for automated items such as standing orders, direct debits and cash machine use.
Of the two main Scottish banks, Bank of Scotland offers even more attractive rates — 45p for debits and credits, reducing to 20p if they are electronic. On its computerised Home Office Banking Service (HOBS) system bill payments are 24p. The Royal Bank of Scotland does not publish a scale of charges, preferring to negotiate them with customers.
All the banks now promise to give notice of any alteration to their charges. Invoicing is likely to become common practice, but will require major changes to the banks' computer systems.
On overdrafts, there is little in the charters to allay fears that loan facilities might be arbitrarily withdrawn by the bank. Banks commended by the Forum of Private Business as giving a better-thanaverage commitment in this respect are the Royal Bank of Scotland (which enters into a contract with its customers), the Bank of Scotland and the Midland.
Barclays' code of conduct draws attention to a source of hidden costs.
If you are overdrawn, or likely to be, the speed at which credits are cleared into your account can make difference to the interest you have to pay. The minimum time from paying in for cheques drawn on UK banks is two days. Barclays promises to credit your account with the value of a cheque "as soon as we receive it".
"Not every hank does this," it adds, "some retain the value of the cheque for an additional day." As well as the interest itself there may he a risk of exceeding agreed limits and triggering extra charges.
Interest rates were one of the chief sources of complaints which led to the introduction of the charters. The charters do not publish interest rates, because base rates may change, and rates charged to different borrowers vary. The only way to find out if you are being charged a fair rate is by shopping around. Don't forget there are other sources of finance — leasing and venture capital, for example.
Each charter outlines complaints procedures: local branch first, then regional office, then head office. Some, however, are more helpful than others in providing addresses and phone numbers.
The Banking Ombudsman is mentioned only by Nat West and the Bank of Scotland, which gives his address and phone number, but incorrectly describes his scope as restricted to personal customers. In fact, the Ombudsman can deal with complaints from sole traders or partnerships — but not from limited companies — and he has no power to get involved in lending decisions.
Several high-street banks now offer computer links for IBM compatibles, including NatWest's BankLine, Royal Bank of Scotland's Royline, and the Bank of Scotland's HOBS which can be used with an existing computer, or via its own dedicated terminal.
Electronic banking means transactions can be made and the state of accounts monitored. Funds can be transferred instantly between accounts (to wring the last drop of interest out of high-interest money market accounts) and payments can be programmed in advance, to make the most of settlement terms.
The Midland offers an allhours telephone banking service called First Direct and this scheme is soon to be copied by the other highstreet banks.
Whatever kind of account you run, bear in mind that the quality of the service you get from your bank is likely to be in direct proportion to the amount they know about you and your business. If you ask for a loan they will demand information, but it will help them reach a true assessment of the risk and the rate to be applied if they are familiar with your business.
To a large extent, it's what you put into your relationship with your bank that makes it work.
1:1 by Peter Willis