Are your partners maximising their return on investment of their cash in your firm?

15 July 2022 / Insight posted in Article

With the recent significant rise in UK interest rates, now is the time for professional firms, and partners personally, to review their cash management. Unless you are actively switching accounts, chances are you are not receiving a great deal of interest on the cash you retain to fund working capital.

While holding cash is not typically advised for the long term, personal or business circumstances may require you to retain significant cash deposits. The most common reasons for this include:

  • To reserve for partners’ future tax payments
  • To manage future liabilities
  • To purchase a property
  • Holding for future investment or acquisitions
  • To provide additional income, or offer protection as an emergency fund

Why use a cash management service?

A good cash management service provides active management of your cash, enabling you to benefit from the highest yielding accounts according to your liquidity preferences (i.e. how much access you need).

As interest rates continue to change, flexibility is vital to ensuring you continue to earn the maximum interest. Using a cash management service, you can access hundreds of different accounts, from over 45 banks, through one platform.

For busy partners and firms, another benefit of the service is the time saving. A cash management service removes the hassle of managing multiple cash deposits and clients benefit from considerably easier administration. There’s just one application process and opening a new account can be as simple as a few clicks.

Most cash management services provide:

  • 24/7 access to a secure and encrypted client portal to view and manage your accounts
  • Consolidated statements for all your deposit accounts
  • An annual summary of interest earned, to help with tax reporting

Is my money safe?

Understandably, partners and firms are concerned about the security of their cash deposits; a reason why many do not seek better returns. Most are aware of the FSCS protection of £85k, if eligible, but what can you do for funds above this?

A cash management service provides a convenient way of spreading cash between multiple banks, allowing you to have significantly higher levels of FSCS protection. All accounts are managed and visible in one place, removing the need for separate applications for each account.

Importantly, to help protect against fraudulent activity, the service does not allow third-party payments, and will only authorise payments to your nominated account.

Please get in touch with your usual Moore Kingston Smith contact if you would like to speak with one of our advisers and discuss cash management for your personal or business needs.