In today’s ever-evolving business landscape, navigating the complex terrain of economic uncertainty is a continuous challenge for business leaders.
While the global economy has shown signs of improvement in 2023 with energy prices easing, inflation remains a concern and the road to sustained growth remains uncertain, particularly in the UK.
As we brace ourselves for the headwinds of squeezed household incomes and the possibility of further interest rate increases, the need to establish a resilient financial foundation for your company is critical.
Building strong financial foundations has become paramount for success.
This is where business savings accounts come in, empowering you to weather the storms and seize the opportunities that lie ahead.
In this article, we delve into the power of business savings accounts, designed to help you overcome these challenges and position your business for future growth.
Let’s get started.
What does a business savings account do differently?
A business savings account allows you to save money specifically for your business in a separate account to your everyday business current account.
By setting aside funds specifically for future expenditure, investments, and acquisitions you can better plan and budget for them. You are less likely to dip into the money than if it was simply additional funds in your business current account and building up a surplus for ‘rainy days’ or opportunities which are just too good to miss means you can avoid raiding your operational funds and stressing your cash flow.
Having a healthy balance in your business savings account is one of the keys to building strong foundations. It gives your business security and stability, making it easier to weather those unpredictable events and sudden expenses that can occur at any time. It can help you overcome setbacks and give you the confidence to plan ahead.
How can a business savings account strengthen my business?
From acting as a shield against the unexpected to providing you with fuel for growth, there are many reasons why they are such a useful but overlooked business tool.
1) Planning for future expenses: Setting aside money in a business savings account can help you plan and budget for future expenses, such as equipment upgrades, marketing campaigns, or hiring new staff.
2) Creating an emergency fund: Unexpected expenses can arise at any time, and having an emergency fund in a business savings account can help you cover these costs without disrupting your business operations.
3) Accessing credit: A healthy balance in your business savings account can help when you need to secure credit and financing from banks and other financial institutions.
4) Earning interest on your spare cash: Many business savings accounts offer interest rates much higher than those paid on business current account balances. This can help your money grow faster, helping you to achieve your business goals sooner.
5) Maintaining financial stability: A business savings account helps to maintain financial stability because you can avoid dipping into your operational funds to cover unexpected expenses.
6) Establishing credibility: Having a business savings account can help establish your credibility, as it shows potential lenders, investors and customers that you are serious about your long-term financial health.
Stephanie Vincent, Savings Distribution Manager at United Trust Bank, said: “Prioritising business savings and contingency planning will help you build a strong financial base that can increase your opportunities for long-term success. And with interest rates having increased substantially over the last year, now is a great time for businesses to start saving or to review their existing accounts and ensure their money is delivering a great return.”
How many businesses in the UK use business savings accounts?
We don’t know how many, but we do know roughly how much money UK businesses and SMEs have set aside in business savings accounts. A whopping £103bn according to UK Finance. That’s a lot of money, but a 2018 survey conducted by the Federation of Small Businesses (FSB) found that 30% of small businesses in the UK had no cash reserves whatsoever. Furthermore, 65% of those that did have reserves had less than three months’ worth of operating cash in the bank.
This suggests that a significant number of UK businesses aren’t protecting themselves from financial shocks and may not have the resources to weather economic downturns or unexpected expenses, let alone plan strategically for growth. If your business already has a ‘war chest’ to seize unexpected opportunities, you may already have an edge over your competitors. If you don’t, perhaps it’s something to consider.
Just make sure you choose a savings partner with a proven track record, consistently competitive interest rates, and outstanding customer service
Although this email and article may contain helpful information and tips, these are not personal advice. You may wish to seek advice from a financial advisor if you are unsure what’s best for your own personal circumstances.