Why cash management is the most underleveraged tool for business resilience

Britain’s small and medium-sized businesses are leaving thousands of pounds exposed, underperforming, and eroding in real-terms value.

Every business owner knows cash flow keeps the lights on. But in an economy shaped by inflation shocks, geopolitical uncertainty, and domestic policy turbulence, simply holding cash is no longer enough. How small businesses manage that money may decide whether they weather the next difficult period – or find themselves caught out by a problem they didn’t know they had.

New research commissioned by Insignis suggests a wide gap between what business leaders believe about their cash and what is actually happening. Finance leaders must step up to the challenge, or at least acknowledge the risk.

How fragile cash management creates risk for startups

Three years ago, the collapse of Silicon Valley Bank rattled finance teams far beyond California. Billions of dollars disappeared in hours, and founders who had spent years building their businesses were suddenly focused on one question: could they pay staff the following week?

At the time, that panic felt exceptional. In truth, it revealed how casually many high-growth startups – SVB’s typical customer – had come to think about cash risk. Before SVB failed, cash management was rarely treated as a boardroom priority. Most businesses spread deposits across accounts for practical reasons rather than strategic ones. A familiar bank logo was taken as reassurance, and few people asked difficult questions about concentration risk or exposure.

The operating environment has shifted considerably since then. Persistent inflation, rising employer costs, and unpredictable policy changes have put sustained pressure on margins. In that environment, protecting company cash matters as much as generating it.

Too little has changed

What is striking is not simply the vulnerability exposed by SVB, but how little has changed since. Too many businesses still treat cash management as administrative background noise rather than a strategic discipline.

The scale of this was difficult to map out, but our recent research has shed light on a couple of key challenges facing today’s businesses.

After surveying a pool of 500 senior leaders at UK businesses, we found three connected issues running through how British businesses manage their cash.

The protection gap nobody is talking about

One in three UK businesses holds over £1 million with a single bank. While smaller businesses tend to hold a lot less than this, more than half of the businesses with less than 50 employees we surveyed still reported holding more than £200,000 in cash.

That matters because the FSCS deposit protection limit for eligible businesses is now just £120,000 per UK-authorised institution in December 2025. Many businesses continue to leave large sums above those protected thresholds, often without much thought about how risky this is.

Perhaps more surprising is the lack of movement since the economic turbulence of recent years. More than two in five businesses say they have not changed how they manage or distribute cash over the past 12 months. This goes up to 58% among small businesses, our research found.

What’s more, 47% of the small businesses we surveyed do not actively monitor cash across all their accounts and have no clear view of what is held where.

Especially for smaller businesses operating on tighter margins, protection risk can appear invisible until the moment it is not. A business may spend months worrying about energy bills, payroll costs or tax changes while overlooking the fact that a substantial share of its cash reserves could be vulnerable if a banking partner runs into difficulty.

Confidence without knowledge

Nearly all finance leaders – 96% – say they are confident their deposits are protected against bank failure. Yet two-thirds either have no meaningful awareness of how FSCS protection actually works or cannot correctly identify what it covers.

Of those who do claim familiarity with the scheme, fewer than four in ten can correctly identify the £120,000 limit. More than a quarter still believe it sits at £85,000.

Nearly half wrongly assume it covers e-money accounts and fintech payment providers (it does not). A third were unaware that the protection applies only to deposits held in UK-regulated banks.

The money already lost

Underperforming cash is actively eating into margins, for businesses small and large.

Our research found that the average business surveyed holds £2.21 million in cash. Based on the gap between the average rate UK businesses currently earn (1.61%, according to Bank of England data) and a conservative market rate of 3.5%, a business with those cash reserves is missing an additional £42,000 in interest every year. At a time when NI contributions have risen, operating costs remain elevated, and every hiring decision is scrutinised, £42,000 carries weight.

Even for much smaller businesses with reserves around the FSCS-protected threshold of £120,000, the figure is still more than £2,250 per year.

For them, this could make a meaningful dent in annual energy bills, cover a whole year of software subscriptions for a small team, or pay for equipment upgrades.

What can businesses do to better manage their cash?

Solving these problems doesn’t require a complex treasury strategy or specialist resource.

The businesses that manage cash well tend to do a few straightforward things: they spread deposits across multiple institutions to reduce concentration risk and, where eligible, to maximise FSCS protection. They actively check that the rates they are earning are competitive.

Most small businesses are looking hard for savings right now – and one of the most significant is sitting in their own bank account, untouched.

This content is contributed by a guest author. Startups.co.uk / MVF does not endorse or take responsibility for any views, advice, analysis or claims made within this post.