Advising your SME clients on cash: at a glance
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What do I need to know? Your SME clients are sitting on cash reserves that are likely losing purchasing power every year, due to inflation.
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What does it mean for me? You can increase your clients’ earnings by referring them to our savings platform, where deposits receive high interest across a range of accounts.
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Why does it matter? In uncertain economic times, strengthening your clients’ finances can drive long term loyalty.
Cash keeps SMEs moving. It covers staff and suppliers, absorbs unexpected shocks, and can fuel growth when invested carefully. But cash is often a forgotten asset. For many Small to Medium Enterprises (SMEs), cash reserves are kept in low-to-no interest accounts.
This means there’s an exciting opportunity for forward-thinking advisers to grow the cash reserves of the SME clients.
In this article, you’ll learn why cash can transform your clients’ portfolio, and how putting it to work is easier than you might think.
The size of the cash opportunity in the UK
In the UK, SMEs have secured a staggering £273bn in deposits. But over half of that is trapped in current accounts earning no interest. The other £125bn isn’t faring much better, earning SMEs around 2% less, failing to keep pace with the inflation rate in recent years.
The result?
SMEs are missing out on over £7.5bn in interest every year.
And all this is happening while the UK base rate is still at 4%, around sixteen times higher than in January 2022 (0.25%). For SMEs, the cost of inaction has never been greater.
But the potential to earn higher interest is just one part of the story.
Why putting SME cash to work is essential
Cash can help mitigate almost every challenge an SME is likely to face in the coming years. These include:
1. Growth ambitions
Expanding into new markets, or funding new projects means proving financial strength, especially if partners or investors are involved.
A strong cash portfolio, steadily growing over time, ensures extra funds are readily available to seize opportunities as they arise.
2. Flat or falling revenue
Recent economic changes have left many SMEs feeling the pressure. Costs and taxes have risen while profit margins have contracted.
While cash reserves provide stability in uncertain times, if they earn no interest, the value of business savings is likely to erode over time. By contrast, when cash is placed across accounts that pay high levels of interest, your clients can grow their business buffers reliably instead.
This can generate extra revenue should the unexpected occur, even when profits flatline.
3. Changing markets
Businesses aren’t the only entities struggling in a difficult economic environment. Customer spending can change suddenly, drastically altering the landscape for consumer-facing SMEs.
SMEs across a range of sectors are also vulnerable to struggling supply chains.
Increased liquidity gives SMEs the flexibility to react fast, making them better positioned to thrive in an unpredictable market.
4. Rules and regulations
The UK government has already hinted at tax rises in its autumn statement, adding another layer of financial unpredictability. But banks and regulators still want proof of a strong cash position. Well-managed cash reserves can help SMEs absorb new costs, maintaining creditworthiness and credibility.
With these factors in mind, how do you give SME clients the confidence to treat cash as an opportunity, rather than a contingency?
Persuading SME clients to act on cash
Reviewing where your clients’ cash is currently held can highlight the real cost of inertia, especially when compared to high interest accounts, like those hosted on a savings platform.
Setting clear goals, building a more resilient reserve, or exploring a range of savings account types can also promote the element of choice. This can give your clients a sense of agency when updating their cash reserve strategy.
With the right approach, you can help your SME clients turn their idle cash into a significant business advantage.
Structuring reserves to thrive
SMEs need to hold significant cash reserves. Day-to-day expenses, payroll, supplier payments, and unexpected shocks all need liquidity. But that doesn’t mean your clients are restricted to instant access accounts.
With a structured approach, your clients can lock away some of their reserves in fixed rate accounts to maximise their interest. The rest can stay in instant access accounts, on hand for unanticipated emergencies.
This is why platforms that let you open and manage multiple accounts at once are an untapped resource for many SMEs.
The Flagstone difference
Flagstone makes managing cash simple for you and your clients.
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One application: Access hundreds of accounts from over 65 banks from one easy-to-use platform, instead of juggling multiple relationships.
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FSCS protection: Spreading cash deposits across different banks secures FSCS protection of up to £85,000 per client, per institution. This can protect your clients’ cash savings if banks go out of business.
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Better returns: Choose from a wide range of instant access, notice, and fixed rate accounts.
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Clear oversight: Adviser access and consolidated reporting save time and give you a complete overview of your clients’ cash portfolios.
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Liquidity with growth: Even short-term savings can earn meaningful interest for significant cash deposits.
Cash management is the next frontier for advisers and their clients
Cash management is often overlooked by SMEs because it can feel safer to leave reserves where they are. But safety and stagnation don’t have to go hand in hand.
If you advise SME clients holding £250,000 or more in cash reserves, a referral to Flagstone could help them turn idle funds into a powerful business asset.
Refer a client to Flagstone for scalable savings
Register for Flagstone and start referring clients ready to benefit from increased earnings on cash reserves.
Manage their money and build stronger relationships.
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