There’s never been a more important time to make sure your money is working as hard as you are for a secure future.
According to a survey by the Federation of Small Businesses, nine out of ten companies have seen a rise in operating costs compared to last year. This will come as no surprise to many business owners who are feeling the pinch of rising fuel and utility costs and increased taxes.
So, with prices continuing to rise at their fastest rate in 40 years and the Bank of England warning that inflation will reach 11% this year, there has never been a more important time to consider whether your business has plans in place to help it weather a storm.
But what can you do now to help future-proof your business? Here are five simple steps below you may want to consider.
1. Build up a cash reserve
A cash reserve can help you to prepare for unexpected problems. In times of economic uncertainty, the peace of mind that comes from having money put aside can be invaluable. In the same way that you may set personal savings goals and set aside money each month to work towards this, look at ways that you may be able to do the same for your business.
2. Plan for your tax bill
Set aside a percentage of your income to pay your VAT and tax bills every week or month to avoid surprises. Rises in national insurance contributions and an expected increase of 6% in corporation taxes next year mean that this is an area you cannot afford to overlook or not plan for.
3. Make the most of your savings
Don’t leave spare money lying idle in your bank’s current account. Business savings accounts are open to all types of businesses and typically pay a higher rate of interest than business current accounts. Do your research to find out what the right type of account is for you.
Easy Access accounts, as the name suggests, make saving simple because you can add to or withdraw from your savings at any time. This makes it the perfect account if you want to build your savings pot but want the security of being able to access your funds. The downside of an Easy Access account is that they don’t tend to offer interest rates that are as high as a fixed rate savings account.
Fixed rate savings accounts can be a great option if you have a lump sum that you are comfortable to lock away for a period of time. These accounts tend to offer a higher rate of interest but do mean you will likely be subject to a penalty if you need to access your funds before the term has finished
Check out Money Facts to find business bank accounts that pay high rates of interest.
4. Don’t put all your eggs in one basket
If you want to benefit from higher rates of interest but are concerned that a curve ball might mean you need rapid access to your working capital, why not consider splitting your investment across different types of accounts? You could manage your savings portfolio across products with varying fixed terms while keeping an emergency fund in an easy access account.
5. Check your savings are FSCS protected
The FSCS (Financial Services Compensation Scheme) protects your savings if your bank or building society goes under. It protects up to £85,000 of savings per individual per financial institution. Although most financial institutions are protected by the FSCS, it’s important that you familiarise yourself with the eligibility criteria and rules.
Ready to take the next step?
Remember, most business savings accounts operate seamlessly alongside your business current account and can be set up in as little as 15 minutes. A little time invested up-front could make all the difference.
This content was provided by Aldermore Bank, whose award-winning business savings accounts are helping small businesses flourish. Find out more about how to make your money work harder.
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