As a business owner, you've worked hard to build and grow your company. But what about the cash sitting in your business accounts? Ensuring that every dollar is working hard for your business can be the difference between steady growth and missed opportunity.
By maximising interest on your savings or investing surplus funds, you can create a financial cushion, fund future projects, or simply make your cash flow more productive.
Here’s how to get started.
1. Maximise Returns with High-Interest Business Accounts
One of the easiest steps to optimise surplus cash is to choose a high-interest business savings account. These accounts typically offer better rates than standard accounts, making them an excellent choice for funds you want to keep accessible. Even small improvements in interest rates can lead to meaningful gains over time, particularly for larger balances.
It’s worth shopping around—many banks offer introductory rates that last a few months or provide incentives for higher balances. By keeping tabs on these offers and revisiting your options periodically, you’ll ensure your business funds are always earning as much as they can.
2. Consider Term Deposits and Low-Risk Investments
If you have funds that your business doesn’t need in the near term, consider low-risk investments like term deposits or short-term bonds. Term deposits offer fixed returns over a specific period, providing predictable interest and peace of mind. Bonds are another option, offering regular interest payments over time and typically lower volatility than stocks.
These options are especially valuable if you’re setting funds aside for a future project or capital expenditure. Instead of letting cash sit idle, you’ll be earning returns that help offset inflation and add to your capital.
3. Use a “Liquidity Ladder” Approach
Managing cash flow is vital for any business and creating a “liquidity ladder” can be an effective way to keep funds available for various time horizons. This approach divides surplus cash into separate pools based on when the money will be needed:
- Operational Reserve: A portion of cash that’s easily accessible for daily operations, typically kept in a high-interest account.
- Short-Term Needs: Funds that won’t be needed for 6-12 months can be placed in term deposits or low-risk bonds.
- Longer-Term Funds: Money set aside for growth projects or expansions that aren’t planned for a few years can be invested in options with higher returns, like diversified portfolios or exchange-traded funds (ETFs).
By staggering your funds, you keep cash accessible while earning higher returns on money you won’t need immediately.
4. Automate and Regularly Review Cash Allocations
Setting up automatic transfers from your main account to high-interest savings or investment accounts can help build a steady financial reserve without extra effort. This ensures your surplus cash is being put to work consistently, without needing regular attention. Automation also helps in maintaining a disciplined approach to cash flow management.
Regular reviews—at least once every six months—will help you adapt to business changes and opportunities as they arise. You might adjust allocations based on new project timelines, unexpected expenses, or updated interest rates, ensuring your strategy remains aligned with business goals.
5. Consult Financial Professionals for Tailored Advice
As your business grows, so do your financial management needs. An advisor can help design an investment strategy that considers your business’s unique needs, risk tolerance, and growth goals. Professional guidance can help you find the right mix of liquidity and investment returns, giving you a balanced approach that supports both current operations and future plans.
Idle funds are missed opportunities. By putting your business’s surplus cash to work, you’re not only maximising returns but also building a stronger financial base to support your growth.
Every dollar working for you now brings your business one step closer to its next big goal.
Get in touch with the experts at Cutcher & Neale today to get started, we've earned the trust and respect of our clients by delivering results.
Jace joined the firm in 2005 and has over 20 years' experience in the taxation and business services field. By immersing himself within the industry, he has developed a deep understanding of the financial and operational issues that face businesses and, as a result, provides tailored solutions to bring the best possible outcome to his clients.
Jace takes a holistic approach, allowing him to plan for all aspects of his clients personal finances including their practice / business, investments and superannuation.
