This is a guest post, brought to you by Simon Healy, Managing Director of Savings at Aldermore Bank.
Almost half of small businesses in the UK are looking to grow in the next twelve months, and in order to do so, they’ll need a steady flow of cash to support and fund their progression plans.
However, research suggests that almost seven out of every ten (69 per cent) Small and Medium-sized Enterprises (SMEs) are trading without a business savings account, a worrying statistic when capital is vital in funding growth.
The research comes from ‘Saving SMEs’ an analysis of the business savings market conducted by Aldermore Bank. Of those businesses that do have a business savings account, one in ten never reviews their account, suggesting that many are missing out on the best interest rates.
Thirty two per cent of businesses believe that they don’t need a savings account, and 58 per cent of sole traders are not interested in learning about saving. But while businesses may feel as though they have their cash flow under control, sometimes unforeseen circumstances can make it difficult to trade effectively, let alone fund progression and growth.
Seasonal fluctuations, unexpected maintenance expenses, late payments and unforeseen opportunities can all leave businesses scrambling for cash, and if they don’t have the support of a healthy savings account, finances can become difficult to manage.
Reasons for saving
Although many companies seem to dismiss the value of savings, 40 per cent of businesses feel earning interest on cash is important for them for the following reasons:
- More than a quarter (28 per cent) of businesses cite interest as their reason for saving
- Four in ten (40 per cent) save to manage and fund unforeseen circumstances
- More than a third (35 per cent) save to pay business taxes, and
- More than a third (34 per cent) save to overcome cash flow fluctuations
By having this forward-thinking attitude and putting away what they can, these businesses are building up a strong cash support structure to fall back on in the event of a rainy day.
Shopping around for the best deal
SMEs wanting to increase the value of their savings would be wise to do their research to ensure they are getting the best deal on their business savings account. Nine out of ten SMEs currently hold their savings with the same bank as their business current account, 22 per cent prefer to keep all cash in their current account.
By regularly reviewing financial accounts, and switching to other providers if they offer a better deal, businesses can maximise their interest and find terms to suit them.
When running a business it can be difficult to find the cash required to save, but by freeing up cash where possible, and making use of competitive interest rates, hard-working businesses can make their money work hard too.
About Aldermore Bank
Simon Healy is Managing Director of Savings at Aldermore Bank. Aldermore Bank is a modern, legacy-free bank which challenges the established view of what banking should be. They deliver award-winning commercial finance, mortgages and savings to Britain’s small and medium-sized enterprises (SMEs), homeowners and savers.