A RAINY DAY FUND IS CRUCIAL

Almost half of small businesses operate with less than £1,000 in savings – and one in five has none at all, research by SME specialist bank Aldermore reveals.

Yet 70% of small firms recognise the importance of setting cash aside to cope with unexpected events.

Ewan Edwards, Aldermore’s head of savings, says: “It’s clear sole traders and the self-employed understand the need to improve their savings, but this is often easier said than done. Better business education and support could help.

”We want to work with the Government to look at ways of backing entrepreneurs and protecting growing small businesses. An Entrepreneur ISA or Small Business Savings Allowance could help.”

Here are Aldermore’s savings tips for small firms:

■ Open a business savings account: It may sound obvious but for every pound kept in your business current account, you could be missing out on interest.

■ Start small and watch it grow: Get into a business savings habit. Start by putting an affordable bit of cash aside each month and increase it as your business grows.

■ Shop around: Don’t just open any account, look for one with a good rate. Many smaller lenders may offer better rates and products more suitable to your needs.

■ Make sure your cash is protected: Savings deposits for personal customers up to £85,000 per banking institution are protected by the Financial Services Compensation Scheme (FSCS) – and small businesses are protected under the same umbrella. Remember, this limit applies per banking licence. So make sure you double check some of the firms you use are not part of the same banking group.

■ Flexibility / accessibility: Ensure your surplus cash is not only working hard for you and earning the best rate, but that it is in an account that offers the flexibility your business needs.