Smart Business Cash Strategies for Year End

A man is holding a phone reviewing business cash strategies for year end.

Cash reserves allow your company to expand even when loan costs are prohibitive. For this reason, sufficient cash on hand is especially important when interest rates are high. To ensure your company has enough cash, you need to develop an effective cash management plan and revisit it often.

The end of the year is an excellent time to review your cash management plan. During this process, consider the following strategies to help your firm enter the new year with less risk and more interest income.

Reduce Risk with Extended Government Insurance

While safety for cash reserves has always been important, the need for adequate protection has become increasingly apparent with the bank failures in 2023. Deposit insurance from the Federal Deposit Insurance Corporation [FDIC] or National Credit Union Administration [NCUA] offers the ultimate protection against bank failure. However, this insurance is limited to $250k per account ownership category at each financial institution. Since the limit is per institution, many companies need relationships with multiple banks or credit unions to achieve full protection.

If your company has large cash reserves, you could benefit from advanced financial technology – a.k.a. fintech. Our company, the American Deposit Management Co. [ADM], uses proprietary fintech to provide the benefits of multiple banking relationships – like extended FDIC / NCUA insurance – without the hassle.

Seek a Higher Return on Cash Reserves

You may have noticed the interest on cash increasing with the Fed funds rate over the past year. However, your company could still be leaving money on the table. That’s because the Fed funds rate isn’t the only factor that determines the rate banks pay for deposits. Geography and the needs of individual banks can also play a role.

With bank deposit levels declining across the country, banks are actively seeking additional deposits. Banks in need of cash often pay higher yields to attract new customers. However, locating banks with above-average yields can be a labor-intensive task. Fortunately, ADM once again simplifies this process. With our deposit management services, your company can achieve nationally competitive interest rates without the added work.

Develop an Effective Liquidity Management Plan

For a successful cash management plan, you need to consider when funds are needed and develop an appropriate liquidity schedule. To create this schedule, first review your planned expenditures – both short and long-term. Then, choose investments that achieve the right balance of liquidity and returns for your business.

If you have cash set aside for long-term projects, consider adding CDs to your investment plan. These investments typically offer higher rates of return in exchange for managed liquidity. Conversely, a more accessible account – like a money market account – could be appropriate if your cash is needed in the short term.

Secure Large Transactions with Business Escrow

If you are planning a large transaction – like buying or selling a business or working with a new supplier – you should be using escrow. Business escrow is a service where a neutral 3rd party holds money, property, or other assets during a large or complex transaction. This service allows both buyers and sellers to rest assured that the contract terms will be upheld.

ADM’s fintech-powered escrow service ensures that transaction funds are secured by FDIC insurance – further improving safety.

With interest rates at their highest level since 2001, it is especially important to revisit your company’s cash management plan this year. By implementing these strategies as you review your plan, you can start the new year with cash that is safe from bank failure, earning a competitive return, and is accessible when you need it.

Earn More, Risk Less® With the American Deposit Management Co.

ADM uses proprietary fintech to help firms get the most from their cash reserves. Our American Money Market Account™ [AMMA™] provides access to unlimited FDIC / NCUA insurance along with nationally competitive returns and twice-weekly liquidity. For cash earmarked for future projects, our CD-Term account can help you achieve even higher returns with managed liquidity. We also offer business escrow services with full government protection. Our experienced team of cash consultants can help your business manage funds effectively and even customize deposit management options to your needs. Contact us to learn more about our solutions and get started today.