Are you maximising your returns from your Company Cash?

It amazes me the amount of money being held by businesses within their Company bank accounts that is not working as hard as it could do for them. We all know that the interest rates that are currently available offer very poor levels of return yet, so few businesses even consider whether they could perhaps do better and make their cash work harder.

At Richmond House, we believe that any Business holding cash should incorporate an effective cash management process with a view maximising the value of its cash holdings.  We also think it is very important for the Business to retain full control of its cash with any accounts being held directly by it.

By way of example, let us assume a Business has £250,000 deposited with a High Street bank and, have said to us that they would like to achieve a better rate of return than they are receiving.

In reviewing their situation using our Effective Cash Management program our priorities are to make sure:

  • The Business has access to sufficient cash held on Instant Access to meet anticipated expenditure and, ensure that cash flow is healthy.
  • The Business is never more than 12 months away from being able to replenish the Instant Access money.
  • The Business has the optimum level of Financial Services Compensation Scheme protection, which is £85,000 per deposit taker (1).
  • The Business’s requirements are reviewed every 12 months and advice given.

Our hypothetical business could have, as per the example below, just an open-ended Business Account with, say a major high street bank, with a position that looks like this:

Our first concern would be the level of financial protection in the event of default and, the second point is the amount of interest being received.

Company Account Type Accessibility Amount Deposited Interest Rate Interest Paid
Major Clearer Business Accounts No maturity date £250,000 0.05% £125.00
Totals £250,000 £125.00


An Alternative Solution

The first consideration is to split the deposits to maximise FSCS protection (1).

Duration Amount
Instant £85,000.00
1 Year £85,000.00
2 Year £80,000.00


The second stage process is to research the marketplace and, the table below shows at the date of the research, the new account(s) recommended for this amount of money and the results show a marked improvement in terms of additional interest been paid as well as greater financial security.

Company Account Type Accessibility Amount Deposited Interest Rate Interest Paid
Saffron Building Society Business Accounts Instant £85,000.00 1.02%    £867.00
Masthaven Business Accounts 1 Year £85,000.00 1.80% £1,530.00
Cambridge and Counties Bank Business Accounts 2 Year £80,000.00 2.00% £1,600.00
Totals £250,000  £3997.00

An enormous £3,872 increase in interest in just one year. The above example highlights a diversified portfolio that provides the opportunity to achieve a total interest payment of £3,997.00, with a full £250,000.00 FSCS protection (1).

Effective Cash Management of your Business finances is another way of generating additional income for your business in a safe investment environment. Richmond House would welcome the opportunity to discuss this area of financial planning and can be contacted directly on 0333 241 3350 to answer any questions you may have.

(1) FSCS Protection applies to small companies only.  Contact us for the current definition.

This information is provided strictly for general consideration only. No action must be taken or refrained from based on its contents alone. Accordingly, no responsibility can be assumed for any loss occasioned about the content hereof and any such action or inaction. Professional advice is necessary for every case.

Nigel Taylor Cert PFS, Dip FA

Nigel Taylor