Your Ready Business speaks to Simon Healy, Managing Director of Savings at Aldermore, a British bank which provides small businesses with the savings accounts required to boost their surplus funds.
Whilst managing cash flow and working capital are always front of mind for small businesses, they must not forget the opportunity to generate good incomes from their business savings. Thousands of small companies across the country are missing out on millions of pounds in savings interest due to a lack of knowledge surrounding business savings accounts, reports a new study conducted by Aldermore Bank.
The findings from the Bank revealed that 20 per cent of small businesses don’t have any savings, while, of those companies that do have surplus funds, 24 per cent do not know how much interest they are currently receiving. Meanwhile, 23 per cent admit they receive no interest on their savings. With cash held by SMEs totalling £152m, these businesses are missing out on substantial interest.
Where are the savings of British SMEs being kept?
The research found that not only are businesses receiving less interest than they could access by switching their provider, but many companies are holding their funds in accounts that aren’t designed to reward savers. In fact, 41 per cent of companies keep all their money in a business current account.
The survey also found that, although 35 per cent of SMEs keep their money in business savings accounts, many don’t know that they can shop around to find the best deal. Indeed, 91 per cent of businesses that have separate savings hold it with their current account provider, suggesting that companies are investing their savings into the same bank due to convenience, rather than because of a rewarding rate.
What interest rates are SMEs actually receiving?
While a quarter of small businesses are unaware how much interest their savings generate, 23 per cent admit they receive no interest at all on their savings. The average interest rate received on surplus funds is 0.6 per cent, while 51 per cent of SMEs received 0-0.5 per cent.
As a result of this research, Aldermore Bank has developed the SME Rate Checker, a tool which enables small businesses to find out their rate and the amount of interest they can expect to earn after 12 months. Within a matter of seconds, SMEs can compare their current level of interest with those rates paid on Aldermore’s range of accounts, from Easy Access to a 5-Year Fixed Term.
Always review your finances 11 per cent of SMEs never review their accounts, while 22 per cent check theirs less than once a year. In contrast, 24 per cent assess their savings annually, while 12 per cent examine their account every six months.
Aldermore’s Managing Director of Savings, Simon Healy, said: “It is clear many SMEs are not getting the most out of their savings .”
“To those businesses who don’t know their rates or who don’t shop around, I urge them to take just a few minutes to take a look.”
By failing to regularly review their accounts, small businesses are increasing their chances of missing out on the best interest rates. SMEs that frequently compare their existing savings accounts with other providers can ensure they’re earning substantial levels of interest and increase their savings.