Why Do I Need Savings for my Online Business?
An estimated eight million people run online businesses from home. In the uncertain economic times, these internet start-ups that incur minimal overheads are quickly gaining popularity.
The online realm is engulfing more and more of our everyday lives, with new opportunities for creativity, innovation and expertise emerging all the time.
These businesses are fairly cheap to run, requiring very little in the way of expenditure. However, no matter how big or small, cash flow is the lifeblood of business and for success at any level, cash capital must be retained.
According to research by Direct Line, the top 5 per cent of private sellers on eBay are turning an annual profit of just over £18,000 per annum.
Although they might not be aware of it, these savvy sellers are actually bringing in almost double the personal tax income threshold, and therefore must be prepared to pay tax.
Any business should be prepared to complete and pay their tax return at the end of the year. A great way of turning this into a positive is to put the amount payable in tax from each contract into a savings account upon payment.
That way, when it comes to year end and the tax bill comes, the savings will have had chance to accrue interest over the year.
If you’re saving for this purpose, you would need a notice or easy access business savings account that will allow you to add to your savings regularly, as well as make a withdrawal when your tax bill becomes payable.
Opportunity for Growth
It’s good practice for any business to build contingency for growth into their cash-flow plan.
If a new business opportunity arises, it’s possible that capital will be required up front to cover expenses, and more often than not this will fall on the business to cover.
Having cash reserves for opportunities as they present themselves is really important for unlocking business potential.
To ensure this, it’s advisable to keep some reserves tucked away in an easy access account that are happily accruing interest at a favourable rate, but fully accessible when required.
Who knows what the future holds for your enterprise. In a number of years you may need to relocate to new office space or make a significant investment in more staff or equipment.
Though the business isn’t at this level yet, there’s nothing to say that it wouldn’t be a possibility for the future. And when the time comes, capital will be required to achieve these various objectives.
Surplus capital can be maximised by tying it up in a fixed-rate savings account for a pre-determined period of time.
In this instance, usually the account holder will not be able to access their money until the account has matured, but they will benefit from the most favourable rate of interest.
No business is totally exempt from getting into trouble from time to time. This might be a client who refuses to pay, a legal issue brought against the business, or breakages in vital equipment.
Overcoming these sorts of issues often exposes online businesses to dire straits. But it needn’t; having savings available in an easy access account to draw from in times of need can be infinitely valuable to a business’ on-going welfare.
It’s all too easy to procrastinate about savings, but by being savvy when placing cash, businesses could more favourably position themselves for future success.
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