One of the many benefits of virtual banking that is not often discussed is how it can help small businesses reduce operational costs.
This can really help any business, but particularly startups, where cash flow can be unpredictable and isn’t yet fully established, or for freelancers with limited funds for additional business expenses.
Virtual banking helps minimise costs, whether fixed or variable, in a number of different ways.
The first area in which virtual banking can help with costs is account costs. Traditional business bank accounts often come with a regular fee in return for the additional services they provide. And these fees can increase sharply as turnover starts to ramp up.
For small businesses requiring any out-of-the-ordinary banking services, traditional business bank accounts may not be able to accommodate these different needs, or may charge a high fee to do so. Virtual bank accounts are much more flexible, offering a range of different capabilities that small businesses may well benefit from.
The other main area in which costs can be reduced through virtual banking is around the fees that are charged for making payments.
By virtue of being built on web-based and digital technology, transactions can be completed at a much lower cost. Often payments made and received from virtual bank accounts are free of charge, and on the rare occasions charges do apply they are considerably lower than traditional banks can support.
For businesses that operate internationally, or are planning to, virtual banking supports payments across borders without the need to set up expensive wire transfers. The fees for these types of transactions can often be significant, which in some cases could put small businesses off expanding their supplier base, or moving into markets beyond their home region.
Virtual banks can also provide a virtual international bank account number (IBAN) to enable small businesses to make and receive payments in euros without the need to set up and pay for a European bank account. Some providers can also send wire transfers using a SWIFT code, an international bank code that identifies certain banks around the world, for a minimal fee.
These are some direct cost savings offered by virtual banking, but there are also related areas in which they can contribute to minimising expenditure.
Returning to businesses operating internationally, many virtual banks provide prepaid payment cards that can be used to purchase goods and services globally, with no additional costs regardless of location. These cards also have flat ATM rates, giving the ability to withdraw cash in any local currency without incurring unexpected costs.
Many virtual bank accounts are also easy to integrate with e-commerce sites, with businesses able to add a payment button to their checkout page quickly and easily. The payment method is linked directly to the virtual bank account of the businesses, with no need to pay additional fees.
Companies can now offer services via their website without needing to invest in new payment technology.
The fact that virtual banks streamline financial transactions – whether it’s the mass pay-out capabilities for invoice payment or payroll, providing a near real-time view of company finances to support an agile way of operations, or providing the means to manage and access company finances via a mobile device – means that employees spend less time dealing with them.
This means employees spend less of their paid time on the management of finances, and more on adding value through focusing on other elements of their job, devote more time to hiring the right people and having time to come up with and develop ideas that could take the business forwards.
Essentially, the money spent on the wages of employees provides a greater return on investment.
As we’ve shown, virtual banking brings a host of cost savings to small businesses that make a compelling case to shift away from traditional business banking.