Managing cash, the essential fuel of your business

Learn more about how to strike the right balance with your company’s cash management.

It’s important for your business to have cash on hand to cover day-to-day expenses, pay salaries and suppliers, invest in new equipment, real estate or technology, drive growth and expansion – and avoid unexpected expenses and economic downturns. control.

Cash can provide a buffer in times of stress or opportunity, so you want to handle it properly. In general, you should have enough money to cover two to six months of operating expenses. It can also be smart to have a line of credit available – just in case.

Finding the right balance

There is a balance between having too much money and not enough. If your business holds too much cash, you may be missing out on opportunities to invest it and potentially generate additional income. Conversely, with an insufficient supply, you may have to borrow and pay interest, or sell assets.

Don’t confuse profit with cash flow

You cannot accurately measure your cash flow simply by studying your income statement. Many factors must be assessed, including accounts receivable and payable, capital expenditures, inventory, and taxes. Your financial advisor can help you assess your cash flow in conjunction with your accountant.

How can a company put its money to work?

CDs offer higher returns than savings accounts, but you may need to tie up your savings until maturity. Money markets have lower earning potential, but provide easy access to your savings so you can make quick adjustments when rates change.

You may also consider a securities-based line of credit. You can use the borrowing power of one or more personal or business investment accounts to take out a loan. Approval typically takes just a few days and there are no upfront, maintenance, or closing costs. There are also flexible repayment options.

Next steps

• Account for cash and run a cash flow forecast.
• Work with your financial advisor to strike a balance between cash and credit to reap the benefits of both.
• Ask your financial advisor how you can access liquidity to help you and your business.

The listed investments or strategies may not be suitable for all investors. Past performance may not be an indication of future results. Every investor’s situation is unique and you should consider your investment goals, risk tolerance and time horizon before making an investment. Investing involves risk and you can make a profit or a loss regardless of the strategy chosen. CDs provide FDIC insurance and a fixed rate of return, while both the principal and yield of investment securities fluctuate with changes in market conditions. Money Market Funds: While fund managers strive to maintain stable net asset value, the funds are not federally insured and there is no guarantee that stable net asset value will be maintained.

A securities-based line of credit (SBLC) may not be suitable for all customers. Proceeds from an SBLC cannot be used to purchase or transfer margin securities, variable insurance products or insurance products issued or brokered through an affiliate of Raymond James. Raymond James Bank will not accept RJF stock or securities issued by affiliates of Raymond James Financial as securities pledged to an SBLC. Borrowing with Securities Based Lending products and using securities as collateral can involve a high degree of risk, including unintended tax consequences and the potential need to sell your asset, which can have a significant impact on long-term investment goals. Market conditions can increase any potential for loss. If the market turns against the customer, he or she may be required to quickly deposit additional securities and/or cash into the account(s) or pay off the loan to avoid liquidation. The securities in the Pledge Account(s) may be sold to satisfy the Collateral Call, and the Company may sell the Customer’s securities without contacting them. A client does not have the right to choose which securities or other assets in his or her account are liquidated or sold to satisfy a Collateral Call.