Making your cash work harder

Are you sitting on a pile of cash, thinking it's the safest bet? Think again! In today's financial landscape, your money could be doing so much more. Discover how cash management services can help you unlock the full potential of your cash reserves.

For individuals with significant cash holdings, whether as a result of a business sale, inheritance, or savings for future goals, keeping funds in a traditional savings account may not be the most effective strategy.

Cash management platforms simplify the process, allowing you to spread your cash across multiple accounts to maximise returns, stay within the Financial Services Compensation Scheme (FSCS) protection limits, and maintain liquidity.

The challenges of holding large cash balances

While cash offers safety and flexibility, holding large balances in a single account can be inefficient for several reasons: 

• missed interest opportunities: Not all banks offer competitive rates, meaning your cash isn’t working as hard as it could 
• inflation erosion: With inflation at 4–5% in the UK, cash held in low-interest accounts is losing real value over time 
• FSCS protection limits: FSCS protects deposits up to £85,000 per bank (£170,000 for joint accounts). Any balance above this limit is at risk if a bank fails 
• time and complexity: Finding the best rates and managing multiple accounts manually can be both time-consuming and overwhelming.

The benefits of using a cash management service

Cash management platforms are specifically designed to help individuals and businesses maximise returns on their cash holdings.

Greater returns: they can provide access to exclusive and market-leading interest rates that are not typically available directly to consumers. Users can seamlessly switch accounts as better rates become available, ensuring they always benefit from the best possible returns.

FSCS protection on large balances: the platforms can automatically spread your funds across multiple partner banks to maximise FSCS coverage. For example, £1 million could be split across 12 accounts to ensure that every £85,000 is protected, providing peace of mind for those with substantial cash holdings.

Simplicity and time saving: they allow you to open and manage multiple accounts from a single online platform. This eliminates the need to complete multiple application forms or liaise with different banks, saving you valuable time and effort.

Tailored solutions: depending on your liquidity needs, you can choose from easy-access, notice, or fixed-term accounts. Cash management platforms often work with a variety of partner banks, offering hundreds of savings options to suit your specific requirements.

Peace of mind: platforms often partner with trusted, regulated UK banks, ensuring that your cash remains secure. This partnership provides an added layer of security and confidence for users.

Who can benefit from a cash management service?

Cash management services are particularly beneficial for several groups. High-net-worth individuals, for instance, often hold significant cash balances following a liquidity event such as a property sale, inheritance, or business exit. These services help them manage and optimise their cash effectively.

Business owners also find cash management services valuable, especially those with large cash reserves. By utilising these services, companies can optimise their returns while maintaining the necessary liquidity for their operations.

Retirees or savers who prioritise safety and liquidity but still seek competitive returns can benefit from cash management services as well. These services provide a secure way to manage their savings while ensuring they earn a reasonable return.

Finally, Trusts and Charities, which often need to manage large cash balances efficiently and securely, can greatly benefit from cash management services. These services help ensure that their funds are managed prudently and effectively.

Key considerations before using a cash management service

Before deciding to use a platform, there are several important factors to consider. Firstly, be aware of the minimum deposit requirement. Some platforms require a minimum deposit of £50,000, making them suitable for individuals with larger cash balances.

Next, consider the fees associated with the platform. Platforms may charge a management fee or receive a commission. These fees are typically tiered based on the balance held in the account.

Lastly, assess your liquidity needs. It's crucial to understand your short-term and long-term cash requirements to determine the right mix of easy-access and fixed-term accounts. This will help ensure that you have the necessary liquidity while also optimizing your returns.

Conclusion

As the saying goes, 'Don't put all your eggs in one basket.' Diversify your cash holdings with a cash management service and unlock the potential for greater returns and enhanced security. Your financial future deserves the best, start optimising your cash today.

The Financial Conduct Authority does not regulate cash management services.