5 min read
Idle cash in your business account: what should you do with it?
Learn how to identify idle cash in your business, calculate your surplus and compare ways to earn returns without compromising liquidity.
Does your business have cash in its account that it will not need over the next few months?
Your business has already done the hardest part: generating a cash surplus. Some of that surplus should always be set aside to cover operating needs. The remaining surplus should be put to work with care: earning a return, avoiding the risk of losses and remaining quickly accessible if an urgent need arises.
The aim is to earn a return on cash your business does not need immediately, without compromising its operations.
How much cash could your business put to work?
Imagine an SME with €120,000 in its bank account.
| Item | Amount |
|---|---|
| Bank balance | €120,000 |
| Salaries and suppliers | €45,000 |
| Taxes and other obligations | €15,000 |
| Reserve for unexpected expenses | €30,000 |
| Potential surplus | €30,000 |
In this example, the business could consider investing €30,000, after confirming upcoming receipts, payments and liquidity needs.
Not every investment suits business treasury needs
There are several ways to invest business cash, from term deposits to investment funds.
However, not all of them are suitable for treasury management. A business needs to balance three factors:
- FlexibilityAccessing cash when it is needed, without being tied to lengthy investment terms.
- ReturnsSeeking a competitive return on cash the business is not currently using.
- SecurityUnderstanding the risks and preserving the capital needed to run the business.
What can you do?
Whenever you consider improving your business treasury management, keep these points in mind:
- Know your bank account balances and your overall cash position.
- Set an operating reserve and decide how much cash to put to work.
- Find opportunities to earn returns through sound products with flexible redemption options.
Numo is addressing these challenges in a single platform!
Make more of your business cash, use Numo.
Discover NumoInvestments involve risks, including the possibility of losing capital. Liquidity and returns depend on the terms of each product. This article is for information only and does not constitute financial advice.