Managing your finances is one of the most challenging aspects of owning a small business, particularly if you don’t have an accounts department and have to grapple with balancing the books on your own. Even simple procedures like paying your suppliers can encroach upon your time and cost you money. SME owners rarely have much time or money to spare, so it’s no surprise that more and more of them are opting to bank over the Internet.
A recent Chambers of Commerce of Ireland survey found that, of all Internet-based applications used by SMEs, online banking had increased the most in popularity, up 21 percent last year. The convenience offered by online banking is the main driver behind this growth. ‘People’s lifestyles are changing. They have less time now to go to the branch,’ explains James Clarke, marketing executive with Bank of Ireland Business Online.
Alan Ramsay, director of JC Ramsay joinery manufacturers and shopfitters in Belfast, agrees. ‘Five or six years ago, we changed to First Trust Bank, which is part of AIB and they offered online banking at the time. I was immediately taken with the convenience of transacting at my desk instead of waiting for statements and queuing up at the branch,’ says Ramsay.
Not only can you carry out transactions at your desk once you have registered with an online banking service, but you can do so at any time of the day or night, 365 days a year. In addition to being available 24/7, most online banking services in Ireland are now real-time as well. ‘If somebody goes into a branch of Ulster Bank in Cork and lodges money into the account of an Ulster Bank customer in Dublin, the Dublin customer can see immediately online that the money has gone into their account,’ says Neil Kelly, manager of Ulster Bank’s eBanking Business department.
Banking online saves you the time it would normally take to travel to your local branch, queue up and carry out your transactions, and also eliminates the time it takes to fill out forms and cheques, post them, and reconcile your cheque book afterwards.
Furthermore, as you manage your own accounts and transactions, the bank charges you less per transaction. It’s almost twice as expensive now to make a credit transfer in your bank branch than it is to do it online. Paying one of your suppliers by sending a cheque through the post will cost you EUR1.01 but making the same payment online costs only 24c [See breakdown of costs in Table 2]. If you add the indirect costs of sending a cheque, such as labour costs and the price of related phone calls, the total cost can add up to over EUR5.
Similar savings can be made in relation to your payroll, according to Ulster Bank’s Neil Kelly: ‘If you have a weekly payroll of 20 people, it will cost EUR40.80 to pay them by cheque but only EUR19.27 to pay them online. The more payments you have to make, the more you save, so if you have a weekly payroll of 200, it only costs EUR59.05 to pay the wages online, whereas paying that many employees by cheque would cost EUR408.’
Spend to save
The banks don’t let you save all this money for nothing, of course. AIB, Bank of Ireland and Ulster Bank all charge varying amounts for their online business banking services. AIB charges all companies a flat rate of EUR200 per year for its iBusiness Banking application. This figure includes an unlimited amount of users per company. Sole traders and farmers are advised to use the 24 Hour Online personal banking service, which is free of charge.
Bank of Ireland offer users a six month free trial of its Business Online product but you will have to pay a minimum of EUR180 per year after that. You have to pay more for service levels two and three, which give you access to international banking and other facilities. Most SMEs use level one, but any SMEs who operate outside of Ireland have to use Level two.
With the Ulster Bank Anytime service (http://anytime.ulsterbank.com) — the only online banking service specifically designed for SMEs — you can view account balances and statements, and reconcile your accounts for free but you must pay the standard charge for making an electronic funds transfer. You also have to pay a monthly charge of EUR19.05 (EUR228.60 per year) to access the Anytime payment module, where you can pay your staff and other third parties. If you make more than 38 transactions per month normally, the savings you make banking online will cover that charge.
Unlike its competitors, National Irish Bank, which is planning to launch its online banking service for business in late spring 2003, will not be charging any subscription fee. ‘Customers will need to pre-register for the telephone banking service beforehand,’ says Raymond Holmes, Project Manager (Business Development) with National Irish Bank. ‘This is so that they have another channel to use, in case the internet is down or their service provider is having difficulties.’
National Irish Bank also differs from its competitors in that it offers no savings to businesses using online banking. ‘Small businesses already benefit from reduced tariffs when they bank with NIB if they are part of the Small Firms Association,’ explains Holmes.
Permanent TSB is the only major Irish banking provider that does not offer its business customers an online banking service. Its website, www.open24.ie, is for personal banking customers only.
The other four major banks all offer the same basic services online. With any of them, you can check account balances and statements, pay bills, order lodgement books and cheque books, make third party payments and fund transfers, take care of the payroll and reconcile your accounts electronically.
Alan Ramsay of JC Ramsay uses online banking for paying his suppliers and his staff, monitoring the company bank accounts and keeping track of cheques and lodgements. ‘What I am trying to do is make my chequebook redundant,’ smiles Alan. ‘I used to go through so many of them in a month and now it might take me six months to use up a chequebook.’
AIB is the only bank that offers a distinct set of extra services free of charge to all visitors to its business portal, which was specifically put together for SMEs. The portal includes a number of online guides on topics such as franchising and trading online, and tools such as those that help visitors create a business plan or a cashflow forecast. The Ulster Bank site tries to help businesses further by providing a link with the BusinessGold company information service. Anytime customers get a number of free trial uses of that service but have to pay on a long-term basis.
The problem with cash
There are still certain things that you just cannot do online. No-one has figured out a way of sending bundles of cash down a phone line so you still have to go to your branch to lodge cash and cheques. Your branch is also the only place you can get a bank draft or apply for a commercial loan or sit down and have a face-to-face chat with your bank manager.
You may not have to see as much of your accountant, however. Both AIB’s iBusiness Banking and Bank of Ireland’s Business Online can be integrated with any accountancy software. Users of MS Money, Quicken and certain Sage products can link into Ulster Bank’s Anytime service and users of the National Irish Bank will be able to integrate accounts in MS Money or Quicken with their online accounts once that service is available.
Being able to integrate your own business accounts with your bank account saves time and effort and is surprisingly easy, if Alan Ramsay is to be believed. ‘If I bought something from you, you would go onto my Sage package as a supplier,’ he explains. ‘Then when I want to pay you, I go into Sage and mark that invoice as paid. Sage creates a file linked to my business current account and I go into my online banking, open the Sage file and pay the invoice. It is very easy. I’m not an accountant and I found it very easy to learn.’
‘Both Sage and First Trust online banking are easy to use and they go together seamlessly. All you have to do is get your suppliers’ bank account numbers and sort codes and input them once and after that, it’s simple. I’m delighted with it. It’s safe, secure and reliable.’
All of the banks are eager to emphasise that using their online services is as safe and secure as Ramsay says it is. Neil Kelly of Ulster Bank is adamant that banking online is no more risky than traditional banking. In fact, he says it is more secure, especially if an encryption facility such as Public Key Infrastructure is used. ‘To break into our PKI system is like trying to identify a single drop of water in all the oceans in the world,’ says Kelly. Both AIB and Bank of Ireland also protect their online customer transactions with PKI.
Apart from the initial hassle of setting up an online bank account and advising your staff and suppliers that you wish to pay them online, there are very few drawbacks to banking online. It can be frustrating if your Internet connection is down for some reason but you can still make any transaction in your branch if needs be. ‘It’s like when people started getting mobile phones,’ comments James Clarke of Bank of Ireland. ‘After a while, you start to think, “What did I ever do without it beforehand?”.’
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