SMEs “losing billions” due to poor cash management

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When her Majesty the Queen launches a ship, she smashes a bottle of Champagne against the bow and the world’s media gather to hear her speech.

We do things a little more discreetly here at Akoni!

This week – after months of hard work behind the scenes – we are proudly launching our exciting new platform to help SMEs manage their cash.

We are starting with what the marketers call a ‘soft launch’. There’s no big public fuss or palaver, and we haven’t invited any royals along. Although, admittedly, we might toast the event with a cheeky glass of fizz!

But why is there a need for Akoni in the first place?

Because, even in this low interest rate environment, UK SMEs collectively miss out around £3bn per year on interest on the £258bn they have in cash balances. We think that’s wrong, and decided to do something about it!

There are banks that offer interest rates up to 2.2% compared to high street 0%. However, most companies are not aware of the better rates that are out there, due to lack of product transparency. What’s more, they are put off by the perceived cost of switching.

How Akoni benefits SMEs

It takes time to shop around for the best business bank account, and then transfer your cash deposits to the product where they will achieve the best interest rate.

This is where Akoni comes in.

At AkoniHub, SMEs can download their personalised cash report and search latest rates at a glance. Then, using our simple Deposit Planner, they can unlock the potential of their cash and maximise the returns they receive.

Here’s an example

The average business improves their return by 10-12 x current income. For example, an SME has £2 million cash  held in an instant access account. By transferring the money to banks with higher rates, the company would generate an additional £30,000 per year, even maintaining the same deposit maturity period.

That return could buy more than a few bottles of Champagne! More feasibly, it could provide for a new marketing campaign or a staff member, contributing to the SME’s productivity and profit and boosting the UK economy.

Felicia Meyerowitz Singh, CEO and co-founder of Akoni said: “SMEs are the engine of the UK economy. By saving them time and helping them make more money, Akoni will make a real impact.”

And there’s more!

A survey by Soldo states that UK SMEs collectively lose more than $10.2 billion every year, because they aren’t managing their cashflow properly.

The research found that SMEs average over four hours per week on managing company finances such as invoices, employee expenses and financial forecasting. The scale of the task grows with the size of the business, but even 15% of startups said they found daily cash management to be a particularly difficult challenge.

Soldo Founder and CEO, Carlo Gualandri, said: “If staff were freed up to dedicate their time to the activities that made a big difference to the company, productivity levels would rocket.”

Technology is the answer.

In order to save time and money, technology is helping to automate many business systems and processes, and cash management is no exception.

We’ve harnessed technology to build a range of simple and efficient tools that are now available for SMEs to use straightaway:

See Akoni’s tools at a glance

  • Deposit Marketplace
    Check today’s best rates at a glance, and filter them according to the governance requirements of your business.
  • Cash Management
    Your personalised Cash Management Report shows how much interest you gain by utilising Akoni’s tools, and provides tips and guidance for optimal cash flow management.
  • Deposit Dashboard
    Build your cash deposit portfolio by trying different alternatives until you find what works for your business.
  • Income and Expenditure Planner
    Enter your key cash inflows and outflows to create an efficient portfolio that maximises returns, while ensuring future expenses are covered.
  • Financial Bootcamp Report
    Get sector-based data that will help you identify opportunities and areas for cash management improvements.

Felicia said: “Akoni solves a problem that most SMEs don’t even know they have, and enables them to access  corporate-level returns on their cash.”

Signup for free at AkoniHub.com

Coming soon…

But we’re not stopping there!

Akoni members will soon be able to access a range of additional cash management services on the platform, such as an Automated Cash Allocation algorithm and advanced Cash Projection tools. It’s all part of the Akoni mission to help UK SMEs to make the most of their cash.

We think her Majesty would be proud.

Akoni helps businesses make the most of their cash. Register for free at AkoniHub.com

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Are your deposits protected?

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Individuals and businesses are rightly concerned about risking their cash, especially since the 2007/8 financial crisis.

As you may remember, the problems started in the US with the sub-prime lending crisis and collapse of Lehman Brothers. This led to a run on UK’s Northern Rock that forced the government to intervene and guarantee deposits, followed by the need to step in and save HBOS and RBS (owner of NatWest).

FSCS

After NatWest was deemed ‘too big to fail’, the government launched the Financial Services Compensation Scheme (FSCS) – an independent fund designed to protect your money if the worst happens.

The FSCS applies to all organisations regulated by the Financial Conduct Authority (FCA), and covers all UK-regulated current accounts, savings accounts and cash ISAs held in banks, building societies and credit unions.

If your bank collapses, it’s likely that you’ll lose access to the cash temporarily, but you should get your money back within seven days.

As part of the Akoni service, we share advice on making the most of your cash. So here are six things you need to know about how the FSCS protects your deposits:

1. The amount of protection you get has increased from £75,000 to £85,000

The amount protected in each UK-regulated financial institution increased by £10,000 on 30 January 2017.

Chief Executive, Mark Neale, said: “Our new limit will protect about 98% of the UK public, so people can be sure their money in banks, building societies and credit unions is safe.”

2. Joint accounts get double protection

Cash in joint accounts is protected up to £170,000 – half each. But beware. If you have another account with the same institution, your individual savings totalling over £85,000 won’t be covered.

3. In some cases, up to £1m will be protected for six months

If your savings balance is temporarily high due to a life event such as selling your main home (not a second home or buy-to-let property), inheriting money, redundancy, or a payout from insurance or compensation, the FSCS protects up to £1m for up to six months if your provider fails.

This allows extra time to plan. Meanwhile, you can move the cash into an account that pays higher interest, and maximise your cash.

4. Check which institution owns your bank

Remember, the limit is not £85,000 for every account, it’s for every financial institution. So you need to know which institution ultimately owns the brand name where your account is held.

The definition of ‘institution’ depends on what licence the bank holds. For example, Halifax and Bank of Scotland are sister banks, and your money is covered up to £85,000 combined. However, RBS and NatWest are also sister banks, but their limits are separate.

See the list on the Bank of England website >

5. Check that the FSCS covers the bank where your money is deposited

Most banks that are located in the UK are also regulated in the UK, including some that are owned overseas, such as Spain’s Santander. However, there are a few EU banks that are not UK-regulated, such as use Fidor and RCI Bank. Instead, they use a ‘passport scheme’ which gives protection from their home government.

Find out more on the FSCS website >

6. Spread the risk

We recommend you deposit less than £83,000 in any one institution, which leaves room for interest to grow. We also suggest you spread your money across at least two institutions. This is because if one bank collapses, there will be a delay in releasing your funds via the FSCS, meanwhile, you will still be able to access your cash in the other.

Akoni helps businesses make the most of their cash. Register for free at AkoniHub.com

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Meet the new challenger banks

The UK financial services sector is going through unprecedented upheaval, with new banks being launched all the time.

Banks make their money by attracting savings and lending out the money at a higher rate of interest. New banks need to increase their lending, which means they need to grow deposits – they do this by offering higher rates of interest on savings accounts. Some of these new banks are therefore offering the best interest rates on savings.

It therefore makes sense to move your savings around more often – and that’s exactly where Akoni’s cash management service fits in.

Why challenger banks

The ‘Big Five’ UK banks hold 85% of the personal current account market – Lloyds has about 27% market share,  Barclays and RBS have 18% each, HSBC has 12% and Santander has 10%. The top four banks also hold about 80% of the small business liquidity market.

People used to be loyal to traditional high street banks because they thought bigger institutions were safer. However, this mindset is changing. Here are the main reasons why:

  1. Traditional banking was discredited by a series of scandals
  2. The business model for high street banks was reformed after the financial crisis of 2008, when the UK Government had to prop up the banking system with a massive £1 trillion
  3. Legislative reform led to improved competition within the banking sector (according to Savings Champion, over 1 million retail customers have already taken advantage of easier switching)
  4. Customers witnessed or experienced poor value, bad customer service and mis-selling
  5. Low interest rates are driving savers to shop around
  6. Most High Street banks focus on acquisition of new customers rather than retention of existing customers
  7. The EU and UK Governments provide deposit guarantees relating to the risk of bank failures.  In the UK this is provided by the Financial Services Compensation Scheme (FSCS), with further information provided below.

Introducing the challenger banks

New banks are now challenging the market share held by the five major high street banks. These challenger banks are more specialised, with simpler business models and greater transparency.

To help familiarise you, here’s a brief introduction to just a few of the new entrants in the UK banking sector:


AldemoreAldermore Bank

Independent bank launched in 2009 and based in Peterborough. Among other investors, it was originally backed by private-equity company, AnaCap Financial Partners LLP (who are now planning to launch Abacus – a digital bank), and has since been floated on the stock exchange. CEO is Phillip Monks, who gained 30 years’ experience at Barclays and Arab Bank. Focus is on UK SMEs, with funds lent to small businesses and as mortgages.


Amicus

Amicus

Amicus is a fast-growing specialist financial services group, providing finance for property and other assets, as well as invoice factoring for SMEs. It’s headed by John Wilde, formerly of SME Invoice Finance, JP Morgan and UCB Bank plc. The group was set up in London in 2009, and applied for its banking licence in 2016.


british business bank

British Business Bank

This government-owned and independently managed bank is dedicated to developing smaller businesses. It provides finance to start a business, grow to the next level, or stay ahead of the competition.


Cambridge and CountiesCambridge and Counties Bank

Launched in 2012, this bank was formed by a partnership between Trinity Hall, Cambridge and the Cambridgeshire Local Government Pension Fund. It provides business savings accounts, property finance and asset finance. CEO is Mike Kirsopp, who previously spent 30 years in commercial lending including at Lloyds.


csbaCommunity Savings Bank Association

CSBA aims to create a UK-wide network of customer-owned, regional banks that use local savings to grant loans to local people, community groups, and SMEs. The Chairman is James M Moore, and the initiative is supported by The Royal Society for the encouragement of Arts, Manufactures and Commerce (RSA).

Copernicus Bank

Since 2012, Aidan Brady and Michael Rossman of Danela Ventures Partners Limited have been building a new UK corporate banking platform to target corporate clients. It will run an open ledger/balance sheet and not engage in deposit-based maturity/risk transformation. The launch date has not yet been announced.


HampshireHampshire Community Bank

A new not-for-profit bank launched recently to serve the Hampshire community, headed by Richard Werner, Professor of Banking at Southampton University, and Sir Vince Cable as Chairman. It’s modelled on small local banks such as Sparkasse and Volksbank in Germany, and aims to ‘create credit for productive purposes’ by lending mainly to SMEs.


Metro BankMetro Bank

When Metro Bank launched in 2010, it was the first new independent UK bank on the High Street for more than 100 years. It has 27 branches in London and southeast England, all open seven days a week, and about 360,000 customers. CEO is Craig Donaldson, who used to hold senior roles with RBS, Barclays and HBOS. Funds are lent as mortgages, personal loans and credit cards in the UK.


oaknorthOakNorth Bank

OakNorth is run by entrepreneurs not bankers, and provides funding for business and property. The CEO is Rishi Khosla, and the Chairman is Cyrus Ardalan.


Paragon BankParagon Bank

Based in Solihull, Paragon Bank launched in 2014 after being a buy-to-let mortgage lender for years. It’s quoted on the stock market. MD, Richard Doe, was previously CEO of ING Direct UK. Funds are lent to UK borrowers and as car loans.


RedwoodRedwood Bank

Redwood was co-founded by Jonathan Rowland and Gary Wilkinson to provide SMEs with commercial mortgages and deposit accounts. The bank is based on the border between Bedfordshire and Hertfordshire.


ShawbrookShawbrook Bank

Launched in 2011 and based in Essex, this UK bank is owned by the Special Opportunities Fund (SOF). CEO is is Richard Pyman, a banker for 20 years. The management team are formerly from RBS Group. Funds are lent to individuals and UK SMEs.


FSCSFinancial Services Compensation Scheme (FSCS)

This free and independent scheme was set up to boost confidence in small banks. It means that customers will be compensated if UK-authorised financial services firms stop trading.

The FSCS protects deposits and savings up to £85k, as well as investment business, home finance, insurance policies and insurance broking. If your savings balance is temporarily high due to a specified ‘life event’, the FSCS protects up to £1m for up to six months.

Note that some EU banks are not UK-authorised as they are covered by their own scheme instead. You should be aware that cash saved in those banks is not protected under the FSCS and will usually be covered by the home country government guarantee.

Visit Akoni Hub’s latest rates to view leading business deposit products.

Akoni helps businesses make the most of their cash. Register for free at AkoniHub.com

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