Budgeting for Micro Business – Alun Williams

Alun Williams, Commercial Director of Savings at Shawbrook Bank

From April 1, gas and electricity bills in Scotland will rise by an average of 54%. Fortunately, some consumers have had at least some protection through price caps and other government measures, but many small business owners have been left on their own. While a conglomerate might have a balance sheet in the billions to absorb short-term risk, smaller companies might struggle to keep the lights on or pay staff.

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The power to protect and pivot

Cash is king. But with increasing pressures on liquidity, it is vital that micro-enterprises manage their money carefully. Studies show that 74% of micro businesses in Scotland have a business savings account*, giving them protection and peace of mind in this volatile economic environment. It also provides a buffer that can be used for growth or to offset sudden spikes in cash flow pressures. At the same time, the greatest strength of a micro-enterprise is its agility, that is, its ability to react quickly to changes in the market. Despite the pandemic, over the past 12 months, 58% of micro businesses in Scotland have seen an increase in demand.

Rising energy prices will affect everyone, but that doesn’t mean it’s too late to manage the money

The best place to start is with a budget plan. Analyze the last 12 months and identify where you can change your 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 achieve each month. Try talking to your bank, downloading a money-saving app, or creating your own spreadsheet.

Putting money aside, regardless of the amount, trumps the ostrich.

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

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

For individual traders, ISAs could be a good option as they can be opened as a personal account in your name. Stocks and ISA shares generally offer better returns but are not suitable as a short-term option or for those with a low appetite for risk, as the value of your investments can go down as well as up.

A shorter-term approach is easy access to ISA cash. However, since the money is free to withdraw, the interest rates for them are generally lower. This means that your returns could be lower than what you would get if you locked up the money. Each tax year you can take out £20,000 on an ISA tax free.

It’s important to have all the information before opening a savings account – personal or professional – that’s 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 suitable for micro businesses and individuals across the UK. This includes easy access, notice accounts and fixed rate bonds to professional clients and, as of June 30, 2021, our clients’ savings deposits reached 7.8 billion.

Alun Williams, Commercial Director of Savings at Shawbrook Bank


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