Budding entrepreneurs must use their available funds to take advantage of fleeting market opportunities. After all, as the saying goes, one must strike when the iron is hot. However, as a business starts to scale up and gain market success, personal bank accounts can become a hindrance rather than a benefit. The better choice is to set up a business bank account that’s specifically targeted at small- and medium-sized enterprises (SMEs).
If you run a small business, having a dedicated business savings account is essential for smarter financial management. The most basic reason to do this is their typical interest rates. Business bank accounts generally have far more generous interest rates than personal banking products, growing your funds more effectively with no additional effort on your part.
The benefits don’t stop there. Picking the right business bank product also gives both you and external auditors the ability to distinguish between personal and business finances. This separation simplifies accounting and tax reporting, while also improving transparency for you and your stakeholders.
Perhaps most importantly, investing in SME business banking also provides an air of professionalism to your dealings, building credibility in your operations. This added trust, in turn, may give you more access to credit and useful partnerships that result in stronger business growth down the line.
Even with these benefits, however, it remains crucial to manage your business’s savings account with care. Here are a few vetted strategies to expand your savings and maintain healthy liquidity:
1) Understand the Implications of High-Interest Savings Accounts
Higher interest rates increase the potential of your savings to beat inflation or even earn real value. Knowing that, it’s important to shop around before committing to a bank so that you can compare different offers. If you already have a business bank account, consider moving your savings to accounts with better rates, since even a small percentage increase can be significant because of compounding interest.
2) Keep Track of Your Account Cash Flow
It’s going to be hard to adjust your spending and keep things running tight if you don’t have an accurate idea of your business’s cash flow patterns. Looking into your cash flow will help you avoid unnecessary withdrawals and also allow you to make realistic forecasts of future savings needs.
3) Allocate Funds for Different Purposes
As you make a habit of tracking your cash flow, you should also begin allocating funds for different purposes. For instance, you can designate portions for tax payments, emergency reserves, or growth investments. This helps keep you from overspending in areas that you can’t afford and guarantees that you have enough funds set aside when specific business costs rise.
Fortunately, some bank accounts have features that let you clearly define what you are saving for. Start exploring these functions for short-term or medium-term goals like purchasing new equipment, and consider adding a long-term goal such as expanding your business once you’ve familiarized yourself with the process. Being able to set specific savings goals is especially handy, as it can keep you from easily spending your savings on non-essentials.
4) Maximize Available Online Banking Tools
To expand on the previous tip, Philippine banks now offer a plethora of online banking tools that can help you fine-tune your approach to savings. These are often underutilized, but they can be especially powerful for monitoring and controlling cash movements, transfers, and other account activities. Most online banking apps now also offer data on your banking habits, helping you develop your savings strategy to new levels of efficiency.
5) Reinvest Profits into Savings
The main reason to get a business bank account is so you can enjoy the benefits of compound interest sooner. While it may be tempting to use all profits for immediate business expansion, making it a priority to reinvest a portion of your profits into your savings account maximizes your gains from interest. More earnings, in turn, can have long-term benefits to your financial stability, making your business highly resilient to unexpected events.
6) Review Your Account Regularly
If you’re just starting your business venture, you might not always land on the optimal savings strategy the first time around. Business costs can fluctuate, and you might find that you’re saving too much or too little in different areas. Doing a general review of expenditures and account performance at regular intervals can help you stay on top of your business’s financial health and lets you make data-driven decisions about your savings strategy.
Harness the Power of Savings to Future-Proof Your Business
Philippine SME owners already face numerous serious challenges in today’s shifting consumer markets. Pick the right business banking solution and use it wisely so that you can reduce your financial burdens significantly, helping ensure that you always have the necessary reserves to meet any situation. As a bonus, you just might develop positive financial habits that put your business in good standing over the long term.