What You Need to Consider When Setting Up a Business Bank Mandate
A bank mandate or account mandate informs the bank who can take financial actions on behalf of the company. Read on to learn more about how a bank mandate works and how to set-up and change one.
When you open a business bank account for the first time you’ll soon come across one document in particular that you may not be familiar with.
This is the bank mandate (sometimes referred to as the account mandate) and it’s essential to understand how it works.
What is a business bank mandate?
A business bank mandate sets out the list of people that are authorised to access and manage the company bank account – such as directors, personal assistants or secretaries – and the instructions for doing so.
The signatories are those that are permitted to carry out certain banking functions on the company’s behalf, such as making payments, adding or removing other people from the mandate and taking out other banking products and services.
The main advantage of a bank mandate is that it makes clear to your banking provider exactly who in the business is permitted to access the relevant account. It also provides clarity within the organisation as to where responsibility lies for certain duties.
Most accounts offer the ability to select access levels. This means that if you don’t want certain signatories to carry out all of the functions, you can tailor the permissions in a way that only allows them to do certain things (such as being able to view transactions but not set up new payments).
There are some downsides too, however. For example, in permitting individuals to carry out financial transactions for the business you are working very much on the basis of trust. If you open up permissions to staff who you don’t yet fully know or trust, you could be leaving the business vulnerable to fraudulent activity.
That’s one reason why many companies keep all their signatories in-house and choose not to include external consultants such as advisers or accountants.
What is a bank mandate form?
This is the document that the account holder(s) must complete on opening the account. It provides the list of signatories and may also include details of trading names used by any of those signatories (for example, if they are a third party such as an accountant).
How to set up and change a bank mandate
The bank mandate is set up as part of the process of opening the account.
Any changes to the mandate have to be requested. Signatories can’t be added or removed simply by logging into online banking and making the change yourself.
Most banks will ask you to call their business banking customer service line – or your relationship manager, if you have one. Alternatively, you may be asked to log onto your online banking and submit the request there. You’ll likely be sent some form of mandate change or variation form to complete, giving details of who is being added and/or removed.
You’ll need to make sure that all the Companies House information on the company and the signatories is up-to-date, or the process might take longer.
The change will usually take around seven to 10 days to take effect, but it can be longer, especially if the bank has to come back to you with any queries.
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Jeff is a freelance journalist who writes across finance & business. He was the personal finance editor at The Scotsman & Scotland on Sunday & a member of the Financial Services Consumer Panel. Read more