Most businesses are sitting on more cash than they need day-to-day. It builds up between tax payments, before a big capital expenditure, during quieter trading periods, or simply because the business is growing and generating more than it’s spending.

That cash is almost certainly earning less than it could be.

The default for most businesses is a current account that pays little or nothing. It’s not a deliberate choice – it’s just where money lands, and moving it feels like one more thing to deal with. But for a business holding £200,000, £500,000, or more in cash at any given time, the opportunity cost is real and measurable.

This guide covers how business savings actually work, what the trade-offs are between different account types, and how to think about structuring your cash so it’s working harder without creating operational headaches.

Why most business cash earns so little

There are a few reasons businesses end up leaving money in low or zero-interest current accounts.

The first is inertia. Surplus cash accumulates gradually, and there’s no obvious prompt to move it. Unlike personal finances, where a savings app might nudge you, business banking tends to be reactive.

The second is uncertainty. Finance teams often aren’t sure how much cash they’ll need in the next 30, 60, or 90 days. Locking money away feels risky when you can’t predict exactly when you’ll need it. So it stays put, just in case.

The third is friction. Opening a separate savings account, moving funds, and managing liquidity across multiple accounts adds admin. For a busy FD or founder, that trade-off often doesn’t feel worth it – even when the maths clearly says otherwise.

The good news is that modern business banking has made this considerably easier. You don’t have to choose between access and return.

Understanding your options

There are three main account types worth knowing about. Each sits at a different point on the access-versus-return spectrum.

Easy access accounts

Easy access accounts let you deposit and withdraw funds whenever you need to, with no notice period and no penalties. The trade-off is that rates are typically lower than notice or fixed-term accounts.

They’re best suited to operational cash reserves – money you might need at short notice, such as a tax buffer, a payroll float, or funds earmarked for an upcoming payment you can’t predict precisely.

The key questions to ask: what rate is being offered, is it variable or fixed, and how quickly can funds be accessed when you need them?

Notice accounts

Notice accounts require you to give advance notice before withdrawing funds – typically 30, 60, or 95 days depending on the product. In return, they generally offer higher rates than easy access accounts.

These work well for cash you know you won’t need immediately but want to keep relatively liquid. A business saving toward a capital investment in six months, for example, or holding reserves it’s unlikely to touch in the near term.

The practical consideration is planning. If you might need the money in 30 days, a 95-day notice account isn’t appropriate. Match the notice period to your actual cash flow visibility.

Fixed-term deposits

Fixed-term accounts lock your money away for a set period – typically six months to five years – at a fixed rate. They offer the highest returns of the three, but come with the least flexibility. You generally can’t access the money until the term ends.

These are suited to genuinely idle cash: funds you’re confident you won’t need during the term. A surplus from a recent fundraise, retained profits earmarked for future expansion, or cash held in reserve for a tax liability that’s 12 months away.

The rate certainty is the main advantage. Whatever happens to the base rate during the term, your return is locked in.

How to think about structuring your cash

The most practical approach for most businesses is to split cash across account types based on when you’re likely to need it – sometimes called a liquidity ladder.

A simple version looks like this:

  • Operational float – funds you need immediate access to for day-to-day payments. This stays in your current account or easy access savings.
  • Short-term reserves – cash you’re unlikely to need in the next one to three months but want available with reasonable notice. A 30 or 95-day notice account suits this.
  • Longer-term surplus – cash you’re confident you won’t need for six months or more. A fixed-term deposit makes sense here.

The split will look different for every business depending on turnover, payment cycles, and how predictable your cash flow is. A business with lumpy, project-based revenue needs more in the accessible tier. A business with consistent monthly recurring revenue can afford to lock more away.

The goal isn’t to maximise the return on every pound – it’s to earn a reasonable return on the cash you genuinely don’t need in the short term, while keeping enough accessible to operate comfortably.

What to check before opening a business savings account

Not all business savings accounts are the same. A few things worth verifying before you commit:

The rate type. Is the rate fixed for the term, or variable? Variable rates can move at any time – usually in line with the Bank of England base rate, but not always. If you’re planning around a specific return, a fixed rate gives you certainty. A variable rate doesn’t.

FSCS protection. Check whether the account is covered by the Financial Services Compensation Scheme. FSCS protection covers eligible deposits up to £120,000 per depositor at a UK-authorised bank. Some savings platforms and e-money institutions operate differently – make sure you know exactly how your money is protected.

Minimum and maximum deposit amounts. Business savings accounts often have minimum deposit requirements. Some also have caps. If you’re holding £2m in cash, check whether the account can accommodate it or whether you’d need to spread it across multiple providers.

Access and withdrawal conditions. Read the small print on notice periods and early access. Some fixed-term accounts allow early withdrawal with a penalty; others don’t allow it at all. Know what you’re signing up for before you deposit.

How it integrates with your current account. Moving money between accounts should be straightforward. Ideally, you want to be able to manage transfers from the same platform you use for day-to-day banking, without having to log into separate systems.

A note on holding cash across multiple entities

For businesses with more than one entity – property groups with multiple SPVs, trading businesses with subsidiaries, holding structures – the question of where to hold cash gets more complex.

Each entity typically needs its own accounts, and managing liquidity across the group can become a significant admin burden if your banking doesn’t support it well. The ideal setup is one where you can see balances across all entities in one place, move funds between them easily, and apply savings products at the entity level without separate applications each time.

This is worth factoring into your choice of bank, not just your choice of savings product.

The bottom line

Earning interest on business cash isn’t complicated, but it does require a deliberate approach. The businesses that get the most from their cash tend to do three things: they keep a clear view of how much they actually need accessible at any point, they match the right account type to each tier of their cash, and they review it regularly as the business changes.

The difference between doing this well and not doing it at all can be tens of thousands of pounds a year for a business holding significant cash balances. That’s worth an afternoon of your FD’s time.

At OakNorth, our Business Banking includes easy access and notice savings options alongside your current account – all managed in one place, with no separate applications needed. If you’d like to understand what your idle cash could be earning, we’re happy to walk you through it.

Interest rates are variable and may change. Your eligible deposits with OakNorth are protected up to £120,000 by the Financial Services Compensation Scheme (FSCS). Subject to eligibility. Terms and conditions apply.