Put Your Idle Cash to Work

Now that you are managing your funds and increasing your cash on hand, what do you do with that cash to have it work for you? There are a few ideas to consider.

• Certificates of Deposits offer the highest interest rates of all the bank accounts; however, your cash will be tied up and unusable for three to six months. This may be an option if you are saving for a future capital expenditure, but it will not be there for you in a crunch.
  
  
• Liquid bank accounts are high-yield money market accounts. These offer a higher interest rate than a regular business savings account. However, there are often restrictions on how often you can withdraw funds from those accounts, and there are fees associated with violating those restrictions. 
  
  
• The most flexible method of earning money on your idle cash is a sweep account. Sweep accounts are designed to withdraw almost all of the balance at the end of the business day. The funds are invested in an array of foreign money market and mutual fund–type investments. Your cash and the interest earned are deposited back into your account in the morning before the start of business. Sweep accounts offer the most liquidity and most flexibility.

Of course, if you have a significant amount of idle cash, a combination of these three vehicles will provide you the proper mix of high yield and liquidity to meet all the challenges and opportunities of your business.

By understanding how your money is spent, setting up controls and wisely investing your idle cash, you will have a system in place to successfully maximize the cash in your business.

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