Switching without breaking payroll

What the switch service does

The Current Account Switch Service covers most small businesses, and it does a genuinely good job of the mechanical part. Within seven working days it moves your balance, transfers your Direct Debits and standing orders, and redirects payments sent to your old account details.

It comes with a guarantee: if anything goes wrong with a payment during the switch, you are covered for any resulting charges or interest.

Eligibility is based on size — small businesses below a turnover and headcount threshold qualify. Larger companies switch manually.

What it does not do

This is the part that catches people out. The switch service does not:

• Tell your customers. Redirection catches payments to the old details, but your invoices, website and email templates still show the wrong account.
• Update your card payment provider. Your settlement account has to be changed manually with Stripe, SumUp, Zettle, Square or whoever settles your takings.
• Reconnect your accounting software. Xero, QuickBooks, FreeAgent and Sage feeds all need reconnecting to the new account.
• Move your overdraft. Credit facilities do not transfer. You must apply separately at the new provider, and approval is not guaranteed.
• Move business savings, loans or merchant services, which are separate products.

The order that works

1. Open the new account first. Do not close anything yet. Verify it works: make a payment in and out.
2. Sort credit facilities. Apply for and secure any overdraft you need at the new provider.
3. Pick a quiet date. Avoid the days around payroll, VAT payment dates and your busiest trading period.
4. Initiate the switch through the new provider, choosing the switch date yourself.
5. Update your card settlement account with every payment provider you use.
6. Reconnect accounting software to the new account and confirm the feed is pulling transactions.
7. Update your invoice template, website and any payment links.
8. Email your regular customers with the new details, clearly and once.
9. Watch the old account for three months before assuming everything has moved.

Payroll specifically

Run payroll from the old account for the final cycle before the switch, and from the new one afterwards. Do not attempt to switch mid-cycle. Update the bank details in your payroll software before the first run from the new account, and check them twice — a failed payroll is the one switching error your staff will remember.

The fraud warning worth taking seriously

Emailing customers new bank details is exactly what invoice redirection fraudsters do. Some of your customers will be suspicious, and the well-trained ones should be.

Make it easy for them to verify: send from your usual address, reference a recent genuine invoice, and give a phone number they already have. For your largest customers, phone rather than email. Expect at least one to call and check, and treat that as a good sign.

Should you switch at all?

Switching bonuses are real money, and the Co-operative Bank in particular has run substantial offers. But read the qualifying conditions — they typically involve opening a linked savings account, depositing a minimum sum and maintaining it for months.

And check the ongoing cost rather than the bonus. A £200 incentive is quickly consumed by a cash tariff that costs you £30 a month more than you pay now. Work out your annual cost at the new provider first, then treat the bonus as a tiebreaker.