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A Small Business’ Guide to Saving Money

POSTED: 8th September 2014
IN: Guides
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Keeping small business bills down may sound like an impossible task when you’re already busy managing your business. But cutting the cost of your expenditure doesn’t have to be difficult. With the help of our small business’ guide to saving money, your business accounts will be looking healthier in no time at all.

undefinedKeeping small business bills down may sound like an impossible task when you’re already busy managing your business. But cutting the cost of your expenditure doesn’t have to be difficult. With the help of our small business’ guide to saving money, your business accounts will be looking healthier in no time at all.

When running a business, savings are a vital requirement in order for your company to grow and thrive. With so much to take on board - managing staff, ensuring customers are happy and maintaining a healthy cash flow - it can be difficult to juggle the demands that running a business entails.

Having money set aside can help, and business savings accounts are often the best way to save money and reap the benefits of interest rates.

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Cash flow and Savings Accounts


Easy access accounts allow you full control of your cash as you can dip in and out of them whenever you choose. Look out for competitive rates of interest and before signing up, have a think about which other benefits would help you. Maybe you need access to online banking and expert UK based telephone support? Also, make sure there are no fees or charges for day to day services, as these can sometimes run up costs.

Another option is a fixed-rate savings account, this can give you peace of mind if you’re concerned about fluctuating interest rates. Rates vary between banks, but you’re likely to benefit from competitive rates of interest, meaning that your money will work for you while locked away.

Often, in order to benefit from high interest rates on a fixed rate account, you may have to meet certain terms when withdrawing money. Read the T&Cs so that you’re aware of any restrictions on withdrawals, as you may find that some privileges are lost if you don’t abide by the conditions. Look out for business accounts that come with bonuses that boost the headline rate. Make sure you keep an eye out for the bonus end date so that you can review your account again and look for another offer.

Cash flow is one of the most important parts of running a business and it’s not unusual for businesses to struggle when faced with unpaid invoices. Sometimes late invoices may leave you unable to make your own payments, triggering a chain of poor cash flow between several businesses. 

Unpaid invoices can often lead to overtrading, a difficult situation where business owners can find themselves burning cash even though their top line is going through the roof. Sometimes the need for your product or service might be there, but due to a lack of available cash, the financial demands of doing business can put a lot of strain on the company. Thankfully, a business savings account isn’t the only way to build up cash and reap interest, there are various cash flow finance options to see you through troublesome periods where late payments are rife and you’re struggling to meet customer demands.

Cash flow finance can grant you more funds than a typical overdraft and depending on terms, they often come with minimal risk. You’ll receive a fast injection of cash and will pay back the lender when your customers have paid the money that they owe you.

Asset based lending is another way of improving cash flow within your business. This method provides you with funding against the value of the assets that you use within your company. So whether you use machinery, vehicles or computer equipment, you may be able to borrow money up to the value of those assets. You’ll receive a high amount of working capital to fund your projects, and if you are unable to make the repayments, the assets will go to your lender.

What type of business are you?

undefined When starting a new company, your business structure is an important factor to select the best business savings option for you. Most businesses in the UK are usually sole traders, limited companies or partnerships. Sole traders are self-employed and as their name suggests, they work alone. A private limited company needs a registered office and at least one director within the UK. Business partnerships can consist of several people who split the profits and responsibilities.

There are different opportunities and funding options available depending on the type of business that you own.

Sole Traders

If you’re a sole trader this means the money that your business makes is in your name and belongs to you. Some sole traders use their own personal accounts to hold their business savings, but some banks won’t allow it. It’s possible to open a business savings account even if you’re a sole trader, and so if you’d rather keep your business savings separate from your regular funds, this might be ideal for you.

Limited Companies

A limited company is regarded as a sole business entity, and so any money does not belong to the business owner, but the business itself. In order to earn interest on the company’s cash, a business savings account is required. There are various rates to choose from, and these will depend on how much access you want to your cash (withdrawals can incur fees) and the amount of money you want to save.

Business partnerships

In a business partnership, responsibilities and profits are shared between partners but rather than the business being an entity, you run the business as a ‘business individual’ allowing both partners to hold and manage the account jointly. In the rare event of a bank or building society going bust, all individual UK savers have protection which covers the first £85,000 of their cash. Sole traders and small businesses are usually covered for this amount too.

For full details of eligibility visit  Financial Services Compensation Scheme (FSCS).

Energy-saving

undefined Just as you would at home, it’s important to monitor and control your energy usage if you want your money to go further. It can help to compare providers and switch to a cheaper alternative if you feel that you aren’t getting good value for money.

Limited companies are entitled to special business tariffs, which can be pricier than other options, but there are various price comparison websites available so that you can weigh up which deal is best for you.

Sole traders, however, are often able to deduct a proportion of their household bills as a business expense, providing they work from home rather than an office or other type of workplace.

When it comes to saving business energy, the same tips and tricks tend to apply as those that you’d exercise in your home. Turning off lights and equipment when they’re not in use may sound like obvious advice, but it can really help to cut costs when everyone does their bit.

Investing in energy-efficient appliances may cost more to buy upfront, but they’ll save you more money in the long run. Insulation can reduce the amount of heat that is lost through the roof and walls, while double glazing can also help retain heat too. Also consider installing energy saving light bulbs if you can, as these can greatly reduce the cost of lighting. 

Phone and broadband

Phone and broadband costs can vary greatly depending on your business and its needs. Working from home is often much cheaper than working from an office as you can use a domestic supplier for both your phone and internet. If you want additional features as well as the basics, such as a faster internet connection or the ability to divert calls to your mobile, you may be able to get a better deal if you opt for a business phone or broadband package. It can sometimes work out cheaper to buy all services from just one provider, though this is not always the case. In some cases, you may want to mix and match services in order to get a selection of the best deals.

Home and Property Insurance

Home and property insurance is a must. It’s also something that can soon mount up and set you back a fortune if you don’t spend some time finding the right deal. If you have a team of staff, there are compulsory aspects to business insurance that ensures that your employees’ safety is considered. It’s also worth noting that even if you work from home, if you have clients visiting you, you’ll need insurance too.

Here’s a quick guide to some of the key things to consider:

Car and van insurance

If you’re using a van or a car for your business, make sure you make this clear when you pay for your insurance. Your occupation and your business’ level may affect the premium. It goes without saying that comparison websites are the way forward when choosing your insurance.

Employee protection

If you have a team of staff then it is vital that you opt for Employers’ Liability (EL) insurance. If you are a limited company you are required by law to have cover of at least £5 million. Avoiding cover can be costly, as you could get fined up to £2,500 for each day that you aren’t covered. Exemptions can be made for limited companies with just one employee, providing the employee owns half of the company.

These policies were designed to protect you and your business and so it is worth signing up as soon as possible. If an employee was to make a claim following an injury or illness at work, then you would need cover. EL insurance also means that if your business went into liquidation or receivership, your employees can make a claim.

Business premises insurance and content insurance

You’ll also need to look into business premises insurance to cover your property and contents insurance to protect your equipment and belongings. Make sure to check the terms of these to find out exactly what is covered and under what circumstances you are protected. For example, the main issues you may want to be covered from include theft, fire and floods.

Product liability insurance

If you manufacture or supply goods, you need to make sure you are covered in the event that your product causes damage to a third party such as a person or property. Even the smallest defects can lead to large claims, which could cause serious harm to your business. Look out for policies which protect you against safety claims, manufacturing quality, spoilage and indemnity costs.

Professional Indemnity Insurance

If you offer advice or professional services to other businesses, you may benefit from professional indemnity cover. This cam help protect you from claims made by clients who are dissatisfied or claim you made a mistake that has cost them money. Even if you haven’t done anything wrong, defending yourself can come at a cost and so professional indemnity cover can protect you and relieve the burden.

Funding and grants

undefined Getting your business off the ground can be difficult in the early stages. Perhaps you need more money to invest in a marketing campaign, or maybe there is already strong interest in your product or service, but you’re struggling to meet the demand. If you need a bit of help to get the ball rolling, it’s worth checking to see whether you are entitled to any grants to help you along.  Make sure that before accepting any grants or support you check the terms and conditions for any hidden catches. If it seems too good to be true, there may be some terms that you need to meet in order to secure the funding. You may also be required to provide a business plan so that funders can see what your intentions are, particularly if you’re just starting out.

Gov.uk

Gov.uk has a database of financial support available, offering a range of support to employers in the form of grants, loans, equity, finance, and awards.

Grants databases

There is an array of online grants databases that provide information on thousands of grants available for small businesses, such as Grants Online and the j4bcommunity.

Employee training

Making sure that your employees are suitably trained is a great way for you to nurture your staff and teach them the necessary skills to aid your business. Staff will benefit from the new skills and your company will be more successful when it is filled with people who know what they are doing. Training can be expensive though, and so it’s worth looking out for free courses, which can save you a lot of money.

The Government-funded Train to Gain scheme gives employers in England access to free or subsidised training courses for their employees. You can receive support regardless of the size or sector of your business and courses can range from basic literacy and numeracy classes to more advanced leadership and management training. If you’re based in Scotland, Wales or Northern Ireland, there are similar schemes available to make it easier and cheaper to train your staff. 

Local council grants

Your local council may also offer grants to up and coming businesses in their area. Have a look through their website to see if there is anything for you. You can find your local council’s details through Gov.uk.

Financial trouble

It’s not unusual for businesses to struggle from time to time, but when facing serious financial difficulties, you can’t just jump ship and abandon everything. If your business needs support when managing debts, then there are places that you can go for help and advice.

In England and Wales the Business Debtline can offer free, confidential and independent advice to help you deal with any debt problems. They can help you budget, suggest ways to increase your income and can draw up Debt Management Plans to help you to get everything in working order again.

If you’re based in Scotland and need some support, Business Debtline Scotland can help you to manage your debts. With a library filled with facts and information and sample letters to write to your creditors, you’ll get the assistance you need to straighten out your finances.

For those in Northern Ireland, the NI Business Info website can point you in the right direction so that you can get help tackling debt problems. 

Managing your own business can be an extremely rewarding career, and if you are careful with your money and know where to go to invest, save and spend, you’re sure to build a healthy amount of cash to fund your business dreams. 

If you would like to find out about Aldermore business savings accounts, please contact us for more information.

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