Sole Traders growing your business beware!

Monzo Chat Business Banking
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I’d like to share the current experience I’m having with Monzo for the benefit of other small businesses…

If you’re a sole trader and planning to one day incorporate your business to a limited company then you need to beware of opening a business bank account with Monzo.

For me, that day is today.
Now the problems may be specific to my own business but it seems a bit unlikely.
First of all it’s important to know that a limited business is a separate legal entity in its own rite, so no matter where you bank, you’ll need to have a new and separate bank account for your incorporated business - that happens no matter which bank you use - so you will have to go through the pain of getting all your customers to pay their standing orders into the new bank account, and manually change over all incoming and outgoing direct debits and any saved card numbers to work with the new account

That can be a bit of a painful experience with any bank - you don’t have the luxury of an account switch option like you do moving from one personal bank to another - because you as a sole trader and your limited companies are two separate entities. So keep that in mind.

Now, knowing that’s a difficult and time consuming process in itself no matter who you bank with, you’d like to think that Monzo would be looking at ways to make it easier, or at least be as good as the other banks.

Oh no, apparently not - for some reason, Monzo have applied an arbitrary number of days between you opening the new ltd company account and them closing the sole trader one for you.

Initially - that limit was 7 (yes just SEVEN) days - so basically, unless you can persuade all your customers to change their payments and sort out your own direct debits and saved card details to swap over in less than a week - you’re going to get bounced expense and income all over the place - and Monzo’s not going to be able to help you sort that out.

They have, after much cajoling, agreed to extend that limit to 30 days for me, but realistically, if you’re a growing business, sending out monthly recurring invoices throughout the month and being paid by standing order, it’s going to be at least 2 months before you know if something is missing or has bounced coming in, or a payment has been missed going out - damaging your reputation and credibility with that supplier.

It does seem as though this is something that Monzo has NEVER had to deal with before, as they’re looking into trying to help, but don’t seem to have a solution yet.

So, in short, if you’re opening an account as a sole trader and plan to one day grow your business and incorporate, you may want to think twice about starting with Monzo as a sole trader so you, your customers and suppliers don’t have a world of pain just because Monzo have a 7 day limit on running two business accounts in parallel !!

To be fair, Monzo are still looking into this, but having pre-empted it with them over a month ago and been told it wouldn’t be a problem, I’m now finding it is indeed the very problem with discussed beforehand and tried to prevent - disappointing and not up to Monzo’s usual exceptional high standards.

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Excuse the basic question, but why can’t Monzo (or anyone else) just change an account from being a sole trader to bring a limited company on any given day?

Granted, this might not be practicable if you’re using the account for personal and business reasons, but if you had a separate sole account I’m not sure why you wouldn’t be able to just change the status on it? :thinking:

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Great question, I’m glad you asked!
I have no idea why - but Monzo can’t do that

Nor does it seem they have any other viable solution. The best (and only) idea they’ve offered so far is for me to let my customers know I’m changing banks by sending them a mass email to try and mitigate things.

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This isn’t a new thing, not sure why you’d.expect two different legal entities to share the same bank account - would you share the same account with a competitor?

Your customers would also need to set you up as a new supplier on their systems assuming they are ltd companies.

Maybe this is something from a work flow perspective to support you informing your customers of a change of bank details that could be improved. It’s early days in the development so not sure this has been fully developed

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7 or 30 is very low, can monzo make it redirect to the new account for a year like the Current account switching service?

I would suggest starting a feedback thread in that section.

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I don’t think the OP is expecting this. My reading is that the 7 day limit is too short.

With hindsight, opening a new business account at another bank would have been a better solution.

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You would hope that this is somewhere that Monzo could innovate to make the process smoother. Forwarding any incoming payments to the old closed account number to the new account for 6 months or so would be great, especially if the forwarded payments could be flagged so you can then follow up with the payer.

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Yes, you would hope - and indeed when I first discussed this issue with Monzo (before I incorporated the company) they took the feedback onboard and said it wouldn’t be a problem.

…several weeks later, now I’ve done what they’ve asked, all of a sudden, it’s a problem - as though I’ve never had the initial conversation.

I do get the feeling that when one person picks up on a chat at Monzo and takes over from somebody else that they simply don’t get to see any of the history, as I’ve explained this several times to several different people - which whilst only a small annoyance - added on top of everything else is really infuriating my right now!

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What you’ve also got to keep in mind is that the figure of 7 days (changed to 30) is completely arbitrary.

If you were to open up a second business account for a totally separate business, no reasonable bank would make you close down any of your other accounts in order to do that.

But for some reason, with Monzo, if you’ve got a Sole Trader account in “name 1”, and then open up a Business account in “name 2” (which should be a totally separate and unrelated entity), Monzo have decided you have to close down your Sole Trader “name 1” account because of that.

Ironically, Company name1 and Company name2, along with company address1 and company address2 and even company email1 and company email2 are totally different, but even that makes no difference!

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10

Hi Nick, thanks for starting this thread!

You’ve touched on some good points, and this, among others, is definitely a process that we’d love to make simpler. Not only because our main goal is making a Business Account that just, works, (irrespective of how new your business is), but also because we really want you to grow effortlessly with us, and hopefully visa-versa!

In hindsight we were wrong to suggest 7 days initially. However; we would hope that 30 days were enough for a business to update all recurring, monthly payments, and inform their clients of any changes to payment details.

You’re right - this is a very new process for us. We’re still ironing out the creases and would love to have something seamless in future (re-routing payments between accounts, similar to how CASS works would be incredible)! We understand that you feel 30 days isn’t enough because you would need 2 months to understand if any payments (inbound or outbound) weren’t accounted for, but if there’s anything further you’d like to add to this, please do let us know via the app so we can discuss this in more detail.

We’ll be reviewing this and will get in touch with you as soon as we have more information.

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It very well might be enough time to inform all clients of changes to payment details. But some clients don’t make the update on their end the first time, so this timescale doesn’t allow for any errors on the client’s side. And cashflow can be a big issue for a small business, so even one client not updating the details when they should, and a subsequent missed payment, could be a real hardship.

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Seems like the issue is that Monzo isn’t going to let you have two business accounts at all. There’s no reason opening a Ltd Co account should necessitate closing a sole trader one, surely?

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Honestly this wouldn’t be a problem if Monzo let “people” have more than one business account.

Someone having more than one business interest is not that much of a corner case, and it would completely remove this painful cut-over process as there’s no reason that the sole trader account has to be terminated immediately.

Arguably, although there is a PSC in common, the second business account for the ltd isn’t even for the same entity as the sole trader, but that subtlety is currently lost on the monzo processes AFAICT.

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Just to add at that with the increase in BEC scams, requests for change of bank details will get flagged and quarantined automatically by most smb/enterprise email filters, this coupled with standard accounting laziness etc means that 30 days isn’t enough at all.

Also, it’s great to hear from the business team on the forum :+1:

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At the risk of sounding a little unsympathetic (and I do have sympathies for you @Nickwatts), this is unfortunately a side effect of using a beta service. Whilst I doubt Monzo call it that, their Business offering has looked like a beta service from day one.

You mentioned they probably haven’t come across this before, and you are probably right. But this is the same story I’ve seen many times, and kinda to be expected when you look at other banks vs Monzo.

There are still so many (relatively basic) banking limitations, issues with processes and customer service etc, that I absolutely wouldn’t want to put my business banking through Monzo (I put all my personal banking through Monzo because my needs are very small compared to a lot of people).

The Monzo business offering is poor in comparison to others - Both Challenger based and Legacy based. I don’t know of a single advantage to Monzo’s business account over, say, Starling?

Either way, it’s people like you who ultimately shape the experience for others to follow.

Hope you get it sorted soon :+1:

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Thanks for the reply, Alex, it is good to see Monzo staff participating here.

Yes, I think I can say with some confidence that the figure of 30 days is still too short for my own business and judging by initial comments here, other businesses as well.

As I’m Monzo’s first sole trader business account to incorporate, I’m basically 100% of your existing customer base that needs this (!) so I guess the requirements of that 100% is probably something to be taken seriously rather than suggest that you’d hope your figure of 30 days is enough - when your only customer experiencing this has told you it’s simply not!

As other folks have said here, Monzo’s not thinking this through enough - in that there are multiple factors to be considered in this transition period:

  1. To tell our customers about the change of their standing orders
  2. For our customers with immediate invoices to act on that change
  3. For our customers with future invoices (issues after 30 days) to also act on that change
  4. For us to tell all of our suppliers about the change
  5. For us to change standing order, direct debit, BACS and payment card details about the change.

Even a small business that has just 15 customers and 15 suppliers that manages to successfully change over just one of those each day (along with doing the rest of their day-to-day business) is going to be stretched to do this reasonably in the timescales you’re suggesting.
Please don’t forget we have our own businesses to run as well as making sure we do this job that Monzo needs us to do by their imposed deadline.

I do understand that Monzo is quite new to business banking so this is a new situation for them, and whilst I’m OK with helping Monzo to develop and improve things there - that does have to be a two-way street that doesn’t cause any significant problems to Monzo’s customers - as in this case, bounced and missing income and expense with our own clients and suppliers - this is a pretty fundamental thing that needs to be handled with care.

Whilst my own company may be the first to be a Monzo business customer that is a sole trader that incorporates (woohoo, lucky me!) - it’s unlikely to be the last - indeed over 600,000 businesses incorporate each year in the UK.

The right thing for Monzo to do here is to hold their hands up and say that this is something that they need to address for all their sole trader customers

  • I’m not going to be the last person that has this particular problem
    Monzo needs to be very honest - and open (especially with the other users in this forum) to say that this 30-day limit is going to be looked at for all customers - not just take it offline with me, please.

I’d also appreciate it if you could also touch on the point that if I were to open a second business account for a totally different business at any other bank wouldn’t reasonably expect me to close any of my other bank accounts with them, so it seems a little bit unreasonable that Monzo makes it mandatory for their business customers to do this - and within a set period - even if it’s now 30 days rather than 7 - why force the closure at all - as that is, in essence, the crux of what’s causing this whole problem?!

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I think 60 days/2 months would be more appropriate, but also automatic redirecting for 13 months. What if you have quarterly overheads? Or a client who pays monthly but is late one month?

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OK folks, I’d like to follow up on this - we’ve not quite finished everything off, but I do have some very good progress with an update from Monzo - all credit where it’s due @Fox has done a great job of getting to the bottom of this.

TLDR: Monzo have agreed to let me run both my Sole Trader and Limited business accounts open simultaneously for 60 days. I hope they’re at least willing to extend that in the short term to anyone else facing the same issues.
Thank you, great job well done!

LONG VERSION…
It’s far from a perfect solution, but does show that Monzo are taking this seriously and trying to work with me to resolve things. It’s yet to be seen if they actually do improve Monzo itself for the benefit of other customers with this but I have hopes that if anyone could do that it’d be Monzo.

Those hopes are based on the fact I’ve chosen to sign my business up with a forward-thinking, young and innovative bank - with that comes the issues that a bank new to business banking like Monzo has a lot to learn and a lot of mistakes to make - and sometimes those mistakes can be to the cost of the customer!

What I’ve learnt in this experience is that Monzo only (officially) let you have one personal account and one business account - that’s not clearly mentioned anywhere so both sole traders signing up with the plans to incorporate in the future and individuals running more than one business need to know that Monzo’s current policies are not very well aligned to suit them.

What I’ve also learnt is that Monzo Chat ain’t great! I’ve wasted literally hours of my business’s time repeating myself to different people, here’s an abridged version of the people at Monzo I’ve spoken to about this one issue and pretty much had to explain the same thing to them over and over again…

  • Me - I’m going to incorporate I need to run 2 accounts at once
  • Hi Kim Here - not a problem
  • (couple of weeks later) Me - Hi I’ve incorporated, I need to run 2 accounts at once
  • Hi, Julina here I’ll get somebody to sort this
  • Me - not a problem, but I need to run 2 accounts at once
  • Kim - me again I’ll get somebody to sort this
  • Naila here - click here to set up your account
  • OK but I need to run 2 accounts at once
  • Steve here - let me know if you need any help
  • Me - all done, waiting on you guys - I still need 2 accounts at once
  • Dan here taking over, I’ll look into this
  • Me - I need 2 accounts at once
  • Feliks here - I’m picking this up
  • Me - OK I need 2 accounts at once, I’m repeating myself a bit too much
  • Sally taking over here - our complaints team will be in touch
  • Me - they already have, told me to chat on here, I still need 2 accounts at once
  • Emilia taking over here - sorry it’s one business account per customer end of
  • Me (offline) *@#^% !! (expletive deleted followed by rant on this Monzo Forum)
  • Alex here (from the forum) - I’ve sorted it all for you, 60 days

Soooooooo many people involved - sooooooo few people listening, soooooo much time and effort wasted.
If my clients take as long as Monzo does to get things sorted, I’m going to need longer than 60 days!! :smiley:

Note to self :- put @Fox on speed-dial and rant in public rather than use Monzo chat.
Good job, well done, you deserve a pay rise!

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My only question for the future, based on some of the comments, would be whether auto forwarding payments from an account held by one legal entity to an account held by another is even possible?

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It certainly hasn’t been offered to me yet.
…but I’m sure @Fox could let you know where Monzo stand with that