Business savings accounts: Can they be beneficial?
Businesses with savings can find they are in a much stronger position to deal with any financial issues that could have a negative impact on their activity. However, a recent survey from Aldermore bank that focused on the South West of the UK found that only a quarter of SMEs had business savings accounts.
The main reason for this – named by 40% of those questionned – was that they simply did not have excess cash flow.
This places the company at risk should a financial situation develop whereby additional funding is required.
A similar concern would be that only 27% of firms said their bank understood their financial situation and the company’s banking needs.
A key concern for the businesses in the survey related to the possibility of an increase in interest rates from their current record low of 0.5%. More than two-thirds of businesses thought any change in the next 12 months would make no difference to whether they would save into a business savings account.
A further 27% said they thought action by the Bank of England would have a positive impact upon their business but despite this only 22% of firms said they had an interest in finding out more about business savings accounts – showcasing that many firms are running a very fine financial line.
In some instances, considering administration or business restructuring may help to revive a company that is struggling. Similarly, it may also help to streamline the financial running of a business so that any unnecessary spending is reduced.
Cash flow issues could also potentially create problems in the long term, a reason why it can be useful to have some form of savings to provide a certain level of protection.
Small businesses should explore their options if they have any excess funds as using a savings account could help to boost their finances.
Doing so also enables a firm to keep a close eye on their finances; reducing the likelihood that they may find themselves with unexpected money troubles.
By Phil Smith