Business owners could leverage cash reserves for pesky expenses

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In today’s competitive market, businesses must explore all avenues to ensure profitability and sustainability.

One often overlooked strategy is the effective utilization of cash reserves. Many small and medium enterprise (SME) owners are so focused on daily operations that they neglect the potential benefits of investing surplus cash in interest-bearing accounts.

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Industry experts argue that this untapped resource could significantly bolster a company’s financial health.

According to Pregasen Padiachee, National Sales Head at FNB Cash Investments, the number of businesses that are overlooking the money-making potential of utilising their surplus cash to earn interest is staggering.

β€œIn our discussions with business owners, we are constantly surprised at how few of them underestimate the potential that their cash reserves have to deliver additional income for their businesses,” Padiachee explains.

Short-term investing

A common misconception among business owners is that investing is complex and only suitable for long-term commitments. However, financial advisors stress that modern investment solutions offer flexibility and accessibility, allowing businesses to grow their funds without sacrificing liquidity.

Short-term and flexible investment options can provide competitive returns, making them an attractive choice for managing surplus cash.

To illustrate, consider a business with an average of R500,000 in idle cash each month. By transferring this amount to a high-interest account, the company could earn significant passive income annually. This additional revenue can cover various expenses, such as bank charges, operational costs, and inventory purchases, thereby increasing overall profitability.

Practical approach

Separating daily operational funds from growth-targeted reserves is another practical approach. Just as individuals allocate their income for immediate and future needs, businesses should adopt a similar strategy. Setting aside funds for upcoming expenses, like tax payments, in interest-bearing accounts can prevent inadvertent spending and maximize growth opportunities.

Financial institutions, including prominent banks like FNB, are responding to these insights by offering tailored investment products. These solutions are designed to meet diverse business needs, providing options ranging from short-term call accounts to longer-notice investment vehicles.

Raising awareness

Raising awareness about the benefits of leveraging cash reserves is crucial. By changing their mindset and recognizing the potential of their surplus cash, business owners can enhance their financial resilience and drive sustainable growth. This strategic shift not only contributes to the immediate financial health of a business but also supports its long-term sustainability and competitive edge in the market.

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Kayde Durden
A created creation creating in Joburg. Life isn't a malfunction, find a hobby.
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