Budgeting for micro-businesses – Alun Williams

Alun Williams, commercial director of savings at Shawbrook Bank

From April 1st, gas and electricity bills in Scotland will on average increase by 54%. Fortunately, some consumers have at least enjoyed some protection through price caps and other government measures, but many small business owners have been left to fend for themselves. While a conglomerate might have a multi-billion balance sheet to absorb short-term risk, smaller businesses could be left struggling to keep the lights on or pay staff.

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The power to protect and pivot

Cash is king. But with rising cash pressures, it’s vital micro-businesses manage their money carefully. Research shows that 74% of Scottish micro-businesses have a business savings account*, providing them with a safeguard and peace of mind in this volatile economic environment. It also provides a buffer that can be used towards growth or to counterbalance any sharp peaks in cashflow pressures. At the same time, a microbusiness’ greatest strength is its agility – reacting fast to market change. Despite the pandemic, over the past 12 months, 58% of Scottish micro-businesses saw an increase in demand.

The energy price rises will affect everyone, but that doesn’t mean it’s too late to manage money

The best place to start is with a budgeting plan. Analyze the past 12 months and identify where you can change spending habits.

Once you know where you are financially, the next step is to decide where you want to be.

Create small, achievable goals, that you can meet monthly. Try speaking to your bank, downloading a money saving app, or creating your own spreadsheet.

Putting money away, whatever the amount, wins over burying your head in the sand.

You’ve worked hard, now it’s your money’s turn

It’s important to find a savings account with interest rates that will do the hard work for you. As with personal savings, business easy access accounts pay lower rates but offer access to your cash when you need it. Bonds pay a higher rate of return, but offer less or no flexibility when it comes to access within a set time frame. It’s worth considering the likelihood of needing short term access to the savings, alongside the need for the best rate.

For sole traders, ISAs could be a good option as they can be opened as a personal account in your name. Stocks and Shares ISAs typically offer better returns but aren’t suitable as a short-term option or for those with a lower risk-appetite, as the value of your investments can go down as well as up.

A shorter-term approach is an easy access cash ISA. However, as the money is free to remove, interest rates for them are generally lower. This means your returns could be lower than if you were to lock the money away. Each tax year you can subscribe £20,000 into a tax-free ISA.

It’s important to have all the information before opening a savings account – personal or business – which is why our approach to savings is simple and transparent. At Shawbrook Bank, we understand the challenges ahead, and are committed to continuing our support for businesses.

We have a range of solutions to suit micro-businesses and individuals across the UK. This includes easy access, notice accounts and fixed rate bonds to business customers and, as of 30 June 2021, our customer savings deposits reached 7.8 billion.

Alun Williams, commercial director of savings at Shawbrook Bank


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George Holan

George Holan is chief editor at Plainsmen Post and has articles published in many notable publications in the last decade.

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