When it comes to running and managing your business, how you organise your savings can seem like a low priority.
However, it is as important to get the most out of your business savings as it is your own personal money.
It is also important that your business savings are structured and managed effectively to ensure that you have ready access to cash when you need it, alongside maximising the interest on longer-term savings.
Read on to find out about the range of business savings accounts available, and how to get the right balance to suit your needs and plans.
It is important to choose the right account
There is nothing really special about a business savings account. In reality, it is just like your own personal savings account, but you use it for the capital in your business. It is worth stating here that you should always keep your personal and business savings separate.
Choosing the right savings account will come down to a series of different factors. These will include:
- How easily you can access your money
- The interest rate you will earn on your savings
- Online functionality and other account services.
There is no reason why you cannot have a mix of different types of account. The key is to work out what is best for you based on your business requirements.
Having multiple accounts can also be of value for maximising your protection from the Financial Services Compensation Scheme (FSCS).
Under the FSCS, up to £85,000 of your money will be protected in the event that your savings provider fails. Any cash above this value is not covered and will be lost if your provider is unable to pay out.
Crucially, this figure counts for each bank, building society, or other institution covered by the scheme that you hold your funds with. So, by saving money with different providers, you will have greater coverage from the FSCS should one of them fail.
You will need instant access to some of your savings
It is almost certain that your business current account will tick all the boxes when it comes to the day-to-day financials. Beyond that, it is possible that you will need access to additional business savings. How much you will need immediate access to will be unique to you and your business.
This could also include an emergency fund that you can access, as necessary.
Business savings accounts that offer instant access to your money tend not to come with competitive interest rates. The key thing for you is being able to make withdrawals without delay, penalty, or restrictions.
It is worth shopping around to get the best possible rate you can, while ensuring the account terms and conditions are suitable for your requirements.
The pros and cons of fixed-term accounts
For savings that you do not need instant access to, but that still need to be accessible in the short term, you could consider fixed-term savings accounts.
This means the interest you earn on your savings is known at outset and will remain the same throughout the savings term.
The interest rates on these type of business savings accounts are usually more competitive than on instant-access accounts.
However, you should bear in mind that you may well have to pay a fee if you need to withdraw money ahead of time. Alternatively, you may need to give notice of any withdrawal, a period that could be anything up to 90 or 120 days.
Given that, you will obviously need to be as certain as possible that you will not need access to your fixed-term savings before the end of the term, or that you can wait the required period before getting it.
Fixed-term bonds are an option for longer-term savings
The rate for a fixed-term bond is paid over a specific period, with a guarantee that it will stay the same during that time.
You will not be able to access your funds during that period, but to offset that, the interest rates tend to be competitive and higher than on fixed-term accounts.
So, a fixed-term bond can be a useful savings option if you are able to put aside a lump sum of money that you are confident you will not need access to for the foreseeable future.
Choosing the best account
Given the different options you have read about, it is clearly important to know how you want to manage your business savings before you start choosing specific accounts.
Your choice will often boil down to one of flexibility against interest rates.
Clearly, you do not have to restrict yourself to one account. In fact, it can very much help your financial planning process to keep different tranches of money separate and managed in different ways. This can also help you to maximise your protection under the FSCS.
Your business plan should include how your savings will be managed. Having this set down and clear at outset can help you organise and administer your savings. Remember that your savings plan does not have to be set in stone. You can amend it as, and when, your circumstances change.
The two key guiding principles behind your savings plan should be that you need to:
- Ensure instant access to your money when you need it
- Get your business savings working hard for you by maximising returns.
Speak to us about bespoke cash management solutions
We work with Insignis Cash Solutions to help you manage your cash reserves.
With an Insignis account, you have access to the whole savings market under one account. That means you can access a range of cash-based solutions to help you maximise the returns on your money.
Provided that the institution you choose is covered, up to £85,000 of your business savings will be protected under the FSCS, too. Check that your provider is covered under the scheme before you deposit any money.
This gives you valuable peace of mind in knowing that you are getting the most out of your savings and benefiting from secure and reliable cash management solutions, while also having protection in the event that your savings provider fails.
The Insignis fees are lower if we introduce you, so make sure you go through us rather than going to them directly.
Get in touch
If you would like help choosing the right business savings account, or want to know more about Insignis Cash Solutions, then please do get in touch with us at DBL Asset Management.
Email firstname.lastname@example.org or call 01625 529 499 to speak to us today.
This article is for information only. Please do not act based on anything you might read in this article. All contents are based on our understanding of HMRC legislation, which is subject to change.