The web and business banking could have been made for each other: the internet lets you do a lot of your banking when and where it suits you. We don't always want to check our accounts or pay bills at times and places the bank finds convenient.
That's particularly relevant for the small business, and especially for the one-person business. We're generally working at precisely the times when bank branches are open. But we still need to pay bills, move money around, do some cheque reconciliations. And frequently it makes sense to do that housekeeping in the evening (maybe even the dead of night) or at weekends.
Online banking is the answer. Sadly, it's not the complete answer. It depends on the question (is yours the kind of business that suits online banking?) and it depends on the bank: services and costs vary considerably.
Convenience is the obvious plus to any web-based account. Standing in a queue at the branch is not a sensible use of anyone's time. Internet banking allows you 24/7 access from any computer with a connection to the web.
Speed is also a feature of most online accounts. You can transfer funds between accounts in a matter of seconds. So you could shift spare cash almost instantly from a current account into a high-earning deposit account. Or you could move money back again to avoid overdrawing or to minimise the overdraft.
In fact you probably won't get 24/7 availability, as some banks do shut down for a couple of the wee small hours for maintenance and system checks, and most will close their services altogether for two or three days a year (generally around Christmas).
You can live with that. More irritating is the sluggishness at which these cyberspace-speed services actually work. Transfers are only immediate for certain accounts, provided they're all at the same bank. Paying bills or moving money to an account at a different bank can take three to five days - just like the old-style counter service, really.
Even with automated electronic transfers from one online account to another, you might expect a lag, perhaps an overnight delay. The banks say that the system simply doesn't allow such fast movements. There's also the suspicion that superfast transfers would mean the banks couldn't make any interest for themselves on your money while it's waiting to be moved.
You'll also find that some of the services you might want simply aren't provided. Overseas transfers aren't normally on offer, for instance. That kind of facility is available if you sign up for the PC banking services offered by some of the big-name banks, the likes of Royal Bank of Scotland's Royline and HSBC's Hexagon. These provide you with software and a direct access dial-up number to manage your accounts without going via the internet. PC banking can be faster, and because security is better (in theory) you'll get more extensive services. You'll pay more for these, of course, and in practice you won't be able to access your accounts from any computer.
Incidentally, security on web-based accounts probably isn't a major issue these days. Barclays had a highly embarrassing moment a while ago when a software upgrade somehow opened customer account details to all and sundry, but security breaches (at least those we get to hear about) are now rare. In general you'll need a username and a Pin code or some other ID to get at your accounts, and you may also be surprised with an occasional check for your birthdate or a memorable question. The downside is that this security can make access seem a bit slow, but that price must be worth paying.
Personal service is also less of an issue. Local branches no longer have the degree of autonomy associated with past times, so the "relationship manager" assigned to business customers who still turn up in person may be little better than the open-all-hours email question-answering service available to online customers.
So how do the web bank accounts differ? The most obvious features are the levels of interest paid, the deals on offer, and the charges levied. Normally these would apply to any business account - in most cases the internet banking is an option on a standard small-business account - though some of these accounts do require transactions to be branch-free. Deposits are made at ATMs or by post, cheque payments might be restricted, electronic payments and money transfers are encouraged.
This might mean that coins cannot be deposited and petty cash floats aren't available. Retailers who need coins for their business probably won't get much joy out of online banking.
The so-called "free banking" offerings also vary widely. Some are restricted to start-up businesses. Many place limits on the amount of activity: Bank of Scotland, which has one of the better deals, allows you to write 100 cheques per month before charges kick in.
Balance that against the minimum amount of cash that has to be in the account to qualify for free banking: it's £5,000 at Bank of Scotland, but at RBS the free banking applies for accounts opened until May 2005, with standard charges and a £5 per month minimum thereafter.
Flat-fee banking from Alliance & Leicester and NatWest involves a standing charge (£10 in both cases) with the same kind of limits on the number of account transactions per month.
Unless your business is complicated, it should become pretty clear which accounts will be good for you - you'll need to know the mix of cheques in and out, the number of standing orders and money transfers you can set up, and the minimum balance you can maintain.
But don't bother: there's a shortcut available in the shape of the BBA/MoneyFacts calculator at moneyfacts.co.uk/mfbaf. This lists all the "introductory offer" deals and allows you detailed comparisons between any two accounts.
What online services offer
· Access to all your business accounts (including deposit, loan and credit card accounts) from one screen
· Check balances
· View current and previous statements
· Transfer money between your accounts at the bank
· Pay bills
· Transfer money to any person or organisation with a UK bank account
· Set up standing orders - then check, amend or cancel SOs and direct debits
· Download statements in a form that can be read by one of the popular spreadsheet or bookkeeping packages, usually one or more of Excel, Quicken, QuickBooks and Microsoft Money
· Order paper statements, replacement cards, pre-addressed envelopes, chequebooks and paying in slips
· Stop a cheque
Case 1: Quick response
Banxia Software, developer of decision support and meeting tools, is run by Matthew Jones. He was an early user of the HOBS service from Bank of Scotland, a pioneering PC banking service that was killed off when BoS moved to an internet-based service. "We didn't have much choice, apart from changing banks," says Jones. "Internet banking does of course allow us more flexibility over where we check accounts from, but it isn't as good as HOBS: there are no foreign currency facilities or special account types.
"We access it daily to watch for bank transfers arriving from customers. This is faster than waiting for the bank to post details to us."
Jones is also impressed with the bank's responsiveness. "Last autumn I told them about a problem and they fixed it here in July. Only nine months to sort out a major flaw: not bad for a bank!"
Security is proving a mild irritant. BoS (and Lloyds) have introduced a second level security system which calls for entering specific characters from a supplementary password: "It all adds hassle to what was an easy system to use."
Case 2: Free for ever
Demographix is a market research tool for building bespoke online surveys. The company is run by Derek Cohen, who shopped around before settling on Abbey National Business: "HSBC was recommended but the application process was tiresome. The Abbey National set-up was quick and easy, and they didn't force me to go for any of the business advice sessions that HSBC wanted."
Cohen's level of business means he falls within the parameters for Abbey National's "free for ever" service. "We go online every day to check recent transactions, progress of US cheques and the like. We don't download statements for importing into a bookkeeping package, though."
Downsides? "They need to extend telephone support to 24/7, as many people work outside usual office hours." That criticism can be levelled at most online accounts though.
Case 3: Instant results
John Sandell runs Diafade, a writing and web design consultancy in Hertfordshire. A long-term Lloyds TSB customer, he found the internet service a useful addition for monitoring the account, "especially as I'm now 15 miles from my original branch".
These days he logs on to his account around once a week ("I probably ought to do that more often") to check the balance and pay bills. Online banking compensates for the loss of personal contact: "These days, of course, I can't talk to the bank. I have to speak to a call centre. Before internet banking I knew many of the branch staff on first-name terms, and it was possible to talk to a specific individual who knew my business."
He finds the online service particularly useful for transferring money between his current and savings account - "it's instantaneous" - and he's generally happy with it. "It works, and on a Mac too! The interface can seem a bit tedious, but I guess that's the price you pay for security."
Case 4: Year round accessibility
Jeremy Freeman is Bamps.com, a consultancy offering web design and e-marketing services, and he also helps his wife, Ravit Freeman, with her personalised greeting cards service Cardsenders. Both accounts are fairly active - an average of five to 10 transactions a day - and for the two businesses they operate two separate online bank accounts. "HSBC offers a specific service to franchises, and Barclays I've been with for six years. In practice there's not much difference between them: they offer similar services, both easy to use."
Freeman sees a major plus in accessibility 24 hours a day, 365 days a year. He also saves on banking charges by doing things himself. But he would like some sensible extras, such as a cashflow forecaster to anticipate the future situation when unpaid cheques and incoming receipts have been cleared. "The system could be more flexible in terms of helping you to run your business, not just simply providing the basics of banking."
