Many SMEs regularly review their costs, from supplier contracts to software subscriptions, yet business savings accounts often escape the same scrutiny. With a growing gap between high street and challenger bank rates, that oversight could be costing some firms thousands of pounds a year. Joe Phelan, money.co.uk business savings expert, explains why now may be the time for SMEs to carry out a simple “business savings audit”.
The gap between where many businesses keep their cash and where it could be earning more has widened.
SMEs tend to be rigorous about costs. Subscriptions get reviewed, supplier quotes get compared, expenses get questioned. But business savings accounts can often escape the same scrutiny, partly because there’s a misconception that they’re all the same.
The process goes something like this: open an account, consider it a box ticked, and then move on to the next task. However, for some business owners, this approach to saving could be costing them thousands of pounds a year.
Right now, many high street banks are paying around 1% on business savings accounts, while some challenger banks and specialist savings platforms, competing hard for deposits, are offering rates of 4% to 4.2% on comparable products.
On a £60,000 balance, that could mean a difference of roughly £1,800 a year. For businesses operating on tight margins, that’s a hefty amount of money to forego.
So why aren’t more businesses moving their money?
Part of the answer is friction. Opening a new business savings account is generally more involved than opening a personal one. Research suggests(1) around 30% of SME owners estimate it takes up to an hour to open an account; around 10% put it closer to two. For a stretched business owner, that’s a real blocker.
There’s also the trust dimension. Business cash covers real obligations, such as tax bills, payroll, and invoices, and for many owners, it isn’t just about the highest rate: it’s about the best rate they can trust for their business cash right now.
That’s why so many people lean towards high street banks. They’re familiar, reliable names with longstanding histories. Moving funds to somewhere less familiar, even temporarily, can feel like an unnecessary risk. It makes sense, therefore, that a relationship with a high street bank built over years can be hard to look past.
The market shift
The rate divergence between high street and challenger banks isn’t arbitrary. High street banks, with large and established deposit bases, don’t need to compete as aggressively for business savings. Challenger banks, on the other hand, often do.
Neither approach is inherently better or worse, but the practical effect is that the gap between where many businesses keep their cash and where it could be earning more has widened.
The security consideration
When reviewing where to place surplus cash, most business owners’ first concern is safety. And rightly so. Most UK-regulated banks and savings platforms are covered by the Financial Services Compensation Scheme (FSCS), which protects eligible deposits up to £120,000.
Some platforms spread deposits automatically across multiple partner banks, letting businesses remain within FSCS protection while still accessing higher rates if they hold larger balances.
It’s also worth remembering that you don’t have to move everything. Many businesses keep their current account with a high street bank for day-to-day operations while placing surplus cash elsewhere. The key is making sure all your money is working as hard as it can.
4 questions worth asking
Before deciding whether to move any cash, it makes sense to step back and review your current setup. Ask yourself a few key questions to see if your business savings are working as effectively as they could be:
- What rate is the business savings account actually paying? (If the percentage starts with a 1 or a 0, you’re likely leaving money on the table).
- How much cash is being held outside of a current account?
- Is any of it sitting where it is by default rather than by design?
- Could some of it earn more without affecting operational liquidity?
The goal isn’t to chase the highest rate at any cost. It’s to make sure that your business cash is working as effectively as possible. Even a small improvement in interest can add up over a year, to the point where it could cover software subscriptions, professional fees, or minor equipment upgrades.
In a business where every cost is scrutinised, reviewing where your cash sits is a simple step that can have a tangible impact
