Most businesses have liquid assets sitting in cash or cash equivalents; thus, the purchasing power of cash reserves diminishes as inflation deteriorates it over time. Currently, bank accounts provide minimal interest rates; even bank certificate of deposits (CDs) and money market funds don’t offer enough yield to shield from inflation.
At DW-A, our team helps business owners to optimize the use of cash reserves to potentially add more income while helping them to meet short- and/or long-term goals.
Cash management is not one-size fits all solutions; we establish with our customers a layered strategy based on reserves usage, segmenting the cash utilization into short, medium and longer-term needs. As a general rule, the investment risk in the strategy is inversely proportional to how soon the business will use each portion of cash; a portion that will go unused immediately has the potential of earning more interest now.
Average yield for cash equivalents and short duration bond ETFs
Source: FDIC, Bloomberg, BlackRock, as of 12/31/18. Savings Account, 1 Month Bank CD, and Money Market Funds are the national average. ETF yields are 30-Day SEC yields. The performance quoted represents past performance and does not guarantee future results. Investment return and principal value of an investment will fluctuate so that an investor’s shares, when sold or redeemed, may be worth more or less than the original cost. Current performance may be lower or higher than the performance quoted.
As business owner you work hard to optimize all resources to make your company thrive, don’t let your cash reserves unchecked.