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Congratulations. You’ve Built the World’s Most Expensive Savings Account.

For many successful business owners, the cash pile wasn't really planned.

Caldwell Financial Ltd

10/1/20262 min read

£800,000 sitting in the company bank account. Congratulations.

The bank is delighted. Your accountant is sleeping soundly. And barring a small meteor strike, you probably have enough working capital for Tuesday.

There is just one awkward question: What is the other £600,000 actually doing?

For many successful business owners, the cash pile wasn't really planned.

£100,000 became £250,000. Then £500,000. Nobody deliberately decided to build Fort Knox. The business simply became very good at making money. That's an excellent problem to have. But eventually it's worth asking what happens next.

When does prudent become surplus?

Businesses need cash. Corporation tax needs paid. Salaries need covered. Equipment needs replaced. Opportunities require capital. And healthy reserves are extremely useful when the economy inevitably decides to misbehave.

But there is a difference between cash the business needs and cash the business happens to have. Surplus cash deserves some attention too.

Large balances sitting in ordinary company bank accounts don't always earn particularly exciting rates of interest. Some businesses also accumulate sizeable foreign-currency balances through overseas trading, adding another consideration to how that cash is managed.

Then there is protection.

FSCS deposit protection is currently £120,000 per eligible company, per authorised banking institution. So, for example, an eligible company with £500,000 deposited with one institution doesn't automatically have £500,000 protected. Ordinarily, £120,000 is covered. The other £380,000 isn't.

Even different banking brands can sometimes share the same banking licence.

Fortunately, improving protection doesn't necessarily mean opening a filing cabinet full of bank accounts. This is one area Caldwell Financial can help business owners explore: considering how surplus company cash is managed while keeping access, interest rates and deposit protection firmly in view.

Sometimes better financial planning isn't about finding an exotic investment. It's simply about making the cash you already have work harder and protecting it properly while it does.

Give the money a job

Once you've established what the business genuinely needs, decide what the remainder is actually for.

· Perhaps it should stay in cash.

· Perhaps some should fund employer pension contributions.

· Perhaps surplus capital should be invested personally or corporately.

· Perhaps some should eventually be extracted.

· Or perhaps some should simply be enjoyed.

The answer will differ for every business owner. But there should probably be an answer.

You built the company to create wealth. At some point, some of that business wealth should have a plan for becoming personal and family wealth.

Making the money was the difficult bit. Giving it a purpose shouldn't be an afterthought.

Otherwise, somewhere along the way, you may have accidentally built a very successful savings account with employees.

It is important to note that investing can help your money grow over the long term, especially when compared to holding cash. You should keep in mind that investment values can go down as well as up and it’s not guaranteed.

Disclaimer:

This article is for general information only and does not constitute financial, investment, tax or banking advice. The appropriate treatment of company cash will depend on individual and business circumstances. FSCS eligibility and protection depend on the depositor, the institution and how deposits are held; banking brands may share the same banking licence. Investments can fall as well as rise in value and you may get back less than you invest. Tax treatment depends on individual circumstances and may change. Appropriate professional advice should be sought before taking action.