How much should my business save?
A practical guide for business savings
A solid savings plan can make all the difference if you're hit with unexpected expenses, or need cash to invest in a new opportunity. But how much should you actually save? The answer depends on a variety of factors — including your industry, growth plans, and financial goals.
Contents
How much should my business save?
There’s no single answer to this question, since it depends on your business' unique circumstances. However, this guide can offer some general rules to help UK-based businesses get started with their savings plan. We’ll walk through different scenarios you might want to keep money aside for, and give examples of how much specific types of businesses should save.
Build your savings with Revolut Business
Discover how our instant access savings account can help you grow your spare business cash. Available on Grow, Scale, and Enterprise plans. Savings T&Cs apply.
How to calculate the right savings target for your business
Below are a few helpful tips for figuring out how much your business should save.
Save enough for 3 to 6 months
If your business has an inconsistent revenue stream, try saving the equivalent of 3 to 6 months' worth of operating expenses. This means adding up any recurring costs like rent, utilities, payroll, and inventory resupply. If you're in a highly volatile industry, you may even want to save 8 to 10 months' worth.
Join Revolut Business
Learn how Revolut Business can help you achieve your savings goals — our savings account offers daily-paid interest, data insights, and 24/7 access.
Sign up
Savings allocation and different types of business savings
It's unlikely that you'll spend every penny of your savings in one place. You'll end up splitting your savings into various categories, but the exact allocation depends on your goals — are you building an emergency fund, or saving up for growth and expansion? Have a look some examples of savings goals below.
Covering unexpected costs
An emergency fund to handle unexpected expenses is a must-have for every business. Setting aside 10 to 20% of your savings for emergency use helps you stay liquid and ready for whatever comes your way.
Building tax reserves
Keeping cash aside to pay taxes helps prevents you from being caught off-guard when tax season arrives. Rates vary based on your business structure (and if you’re registered for VAT), but reserving 20 to 30% of your savings for tax is a good start.
Remember to keep a separate reserve for paying VAT, if you're registered, and to regularly review your tax liabilities with an accountant.
Planning for expansion
Allocating 10 to 15% of savings for growth-related investments allows your company to be proactive rather than reactive. These savings could go towards investing in new technology, hiring talent, or entering new markets.
Ensuring your staff are paid
Having a payroll buffer keeps your team’s morale high and reassures them that they're a top priority. Allocate at least a month’s payroll from your savings — so your staff get paid on time, even if money gets tight.
Where should you keep your business savings?
Balancing liquidity and interest
Having a good interest rate is important, but you want to be able to access your savings when you need them most. So it's important to strike the right balance.
Instant access savings accounts typically have modest interest rates, but also offer immediate access, which makes them perfect for emergency funds. Explore our comparison of instant access business savings accounts in the UK to see some of the different options on the market.
High-interest Business Savings Accounts
While they're usually less accessible, high-interest savings accounts offer a great low-risk option for growing your money. Compare the interest rates, fees, and access conditions on offer from banks and financial institutions to find the best deal for your business.
Fixed-Term vs Instant Access
Fixed-term deposits offer higher returns than most traditional savings accounts, but make your savings inaccessible for specific periods. If you’re confident you won’t need a chunk of savings for a while, they can be a smart addition to your savings portfolio.
What makes a successful savings strategy?
- 1
Make savings a fixed business expense
Treat savings as a must-have in your budget, not as something to contribute to once everything else is covered. Setting aside funds as a priority helps create financial security.
- 2
Adjust your savings strategy regularly
You'll need to change the way you save as your business scales. Consistent reviews and updates help align your savings goals with your expanding operations and shifting market conditions.
- 3
Optimise your savings with smart financial tools
Try using software for expense management, accounting, and cashflow analysis. It can help you track expenses, manage your savings, and gain insights that can drive smarter financial decisions.
- 4
Balance saving with investment
Successful businesses understand the importance of investing as well as saving — you might miss out on valuable growth opportunities if you're too concerned with building your savings. Consider your financial options carefully when an opportunity presents itself.
Building a sustainable business savings plan
Deciding how much your business should save is a big question, so do as much research as you can before creating your savings strategy. Look into your operating expenses, industry norms, the size of your business — anything that might impact the amount you should save, or how it should be allocated. It's also important to consider your savings goals. Are you building an emergency fund, tax reserve, payroll buffer — or all of the above? Figuring out your saving priorities helps you prepare for every occasion.
Learn more about business savings
How Revolut Business helps your business save smarter
Revolut Business Savings accounts offer a range of benefits to help grow your spare business cash.
Savings available on Grow, Scale and Enterprise plans. Rates vary based on your plan. Savings T&Cs apply.
Earn interest daily without locking away funds
Get great interest rates, paid daily to your account, without the limited access of fixed terms.
Access when you need it, 24/7
Add or withdraw money whenever you need to, instantly. And set controls for who else gets access, too.
Track every movement
Sync Savings to your accounting software and see all your withdrawals, deposits, and interest payments in one place.