Because there are many solutions available to help your company make the best use of excess funds, it’s important to start with a broad view of business goals and the tools that best support them. With the support of a strong banking team, take advantage of savings and investment resources to help your company maximize and stabilize earnings across business cycles.
Identify opportunities to capitalize on excess funds
The first step in an effective liquidity management plan is understanding how much cash you need on hand to cover basic operating expenses like rent, payroll and insurance payments. How do these recurring expenses line up with typical income flows? Are there periods of time when you’ll likely have more available cash than you need to cover your payments?
By taking a closer look at cash flow patterns, you’ll be able to identify opportunities to put excess liquidity to work. Even if your cash flow is tight and you need quick access to excess funds on a regular basis, there are solutions and investment strategies designed to fit short return timeline requirements. By taking a strategic approach and expanding the tool set you use to manage excess liquidity, there is opportunity to increase returns while optimizing working capital.
Once you’ve examined the timing and amounts of regular payments and income streams, you can work with your banker to create a liquidity optimization plan that will work for you. Short-term, low-risk solutions can maximize returns while also ensuring you have access to the cash you need to cover costs as they arise.
Beyond traditional bank depository products, your cash management strategy can include short-term overnight capital markets investment options like time deposit accounts or money market funds that may offer better returns. Your banker can help you build a custom plan that includes both savings and investment accounts to optimize earnings while maintaining access to cash as needed.
Look to your banker for long-term support
Your relationship with your banker plays an important role in building a sound, long-term investment plan. Despite their popularity, there are trade-offs to using automated programs versus human advisors. For businesses chasing yield, automation isn’t the answer.
Not only can your banker help you choose a short-term savings model that aligns with your cash flow fluctuations, but they can also help you create a long-term strategy. Building a liquidity management strategy that yields consistent returns requires a deep understanding of a business’ goals, special requirements and risk appetite.
Working with the right financial partner provides what automated systems lack: aligned teams of experts who know your business well enough to create a custom plan and can evolve that plan as your company grows and your needs become increasingly sophisticated.
Finding a partner to build a strong liquidity strategy
Optimizing liquidity is a complex task that requires the right partner. Research to find a team who understands the big picture of your business’ cash requirements and objectives, offers a broad solution set to meet those objectives, and can partner with you to put your excess funds to best use.
Working with a bank that offers the expertise and capabilities you need can help you leverage unused cash, maximize earnings and take a more strategic approach to your company’s short-term needs and long-term growth objectives.
Learn more about how UMB can partner with you and your business. You can also download our in-depth cash management whitepaper that covers both short- and long-term excess liquidity strategies for your business.