smallbusiness.co.uk: Helping your business think big

Whether or not to open a Euro account depends on your individual circumstances. As Brian Capon from the British Bankers’ Association explains, "if you have both an incoming and outgoing Euro stream then a Euro account is likely to be advisable. However, if the stream only goes one way, it may not really work.”

Capon's point is that using a Euro account to receive payments only fails to provide you with any real advantage. This is because you will still find yourself having to convert these funds into sterling at a later stage. And if this is the case, you may as well just pay the cash straight into your existing account and deal with the associated charges up front.

Lloyds TSB's Jo Ganly reiterates this point. "If cash flows only one way and receipts are infrequent it may not be worth [having a Euro account],” she explains, adding that utilising traditional foreign exchange rates to pay directly in to your sterling account "as and when [payment is received]" could serve you better.

Ganly's comments, however, do raise one other interesting point, which Capon develops further. "If you're receiving lots of small payments, even from just one supplier, it might make more sense to have a Euro account as you won't keep getting stung for commission," he explains. Instead, you'll be able to convert the entire amount to sterling in one go.

Another option, he suggests, is "to see if you can source supplies from those accepting payment in Euros, as this will give you an outgoing stream."

On account of these complexities, both Capon and Ganly recommend that you speak to your existing business banking adviser, as they will be able to comment on your specific circumstances.

If you eventually decide that you do need a Euro account, remember to shop around. Capon deems it essential to bear in mind that the services available may differ greatly from those associated with your regular sterling account, pointing out that you may, for example, "need to keep a minimum amount deposited in the account."

Virtually all the major UK banks offer Euro accounts so do your homework, choose the package that best suits your business and watch out for hidden charges.

Lloyds, for example, requires a half-yearly fee of £12 and also charges additional (variable) fees for cash and cheques paid into or out of your account. Other banks offer similar deals but whichever one you choose, always check out areas like minimum balance, commission and cheque-clearing fees.

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