Put idle Small Business Money to Work

A lot of small business owners are letting their spare business cash sit idle in low-interest accounts, instead of putting this idle money to work.

Many of the small businesses leave cash they don’t need for working capital in lower-interest accounts just in case they need it for an emergency. Up to %40 of the small businesses have $10,000 to $100,000 in cash in low-interest accounts.

This is not a smart thing to do, because over the last couple of years all banks have created so called at-call accounts where you can get a much high-interest on your money. There are banks that offer up to 8 percent for a minimum of $5000 for six months.

The good thing is that you still have access to this money, in case of an emergency for instance. If the business wants to access the money (or pull out all the money) they can simply pay the break-cost fee. (You pay some money if you don’t uphold your contract.)

But this fee is peanuts compared to the gains of getting more money on money you’ll only need in rare circumstances such as an emergency.

You as a business owner should ask yourself the following questions to determine if the business has excess cash:

  • After you have paid your creditors, do you have money to invest?
  • Can you pay staff and bills on time?
  • Can you take advantage of opportunities in the market such as discounts on materials?
  • Have you had to use money for any emergency in the past 12 months?

One of the keys to making cash work harder is to plot the business operating cycle and, by using this information to forecast your future cycle. This way you’ll have a better understanding of the cash peaks and which money is sitting idle! This money can be moved (without much risk) to a high-interest account.

A business operating cycle plan can help you with the following things:

  • Make educated decisions on aspects of your business
  • Determine the best times to purchase stock
  • How much stock to order at any particular time
  • How to avoid having too many debtors and creditors at the one time
  • How to avoid excessive borrowing
  • How to prevent over-investing

So take another look at your business financial and at what bank-accounts your business is using. With a little effort from you there is money to be made for your business! It is also a good idea to make a business operating cycle plan which can help you to make certain decisions and make the business cash work harder.

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