Protect your cash: Invest for growth
One of the most valuable assets to have during a time of uncertainty and opportunity is cash
The global economy is likely to recover as vaccines are administered. Pair this with low interest rates and the huge fiscal stimuli injected into the world’s largest economies, and you have a solid recipe for risk-on sentiment.
Emerging markets assets, such as those found in SA, bask under such circumstances. The current market is evolving and difficult to plan for in the longer term, but increased business activity has sparked renewed vigour and companies are now starting to look at ways to maximise their cash with the right cash investment opportunity, with strong yields.
As businesses start to stabilise, they should not back away from identifying growth and investment opportunities and should continue to think about their cash. Businesses should always be thinking about their cash strategy — and how they can use this to get better returns. If cash investments aren’t working for the business, it’s a wasted opportunity and, in this market, opportunity is everything.
One of the most valuable assets to have during a time of uncertainty and opportunity is cash. We know that “cash is king”, but understanding where to put it can be a difficult exercise especially as a one-size approach to customised liquidity doesn’t work.
Of course, there are many products that perform differently in diverse rate cycles, which is why it’s so important to shop around. But what’s essential? In my view, it’s the ability to earn off of existing funds, instead of letting the unused money become an opportunity cost.
Look for a cash investment product that can help you get the best possible return on your cash — but, more importantly, understand how to structure this investment to ensure you get the best possible return as well as flexibility. The rate you choose for a cash investment product will depend on your business’s cash flow requirements.
In a decreasing rate environment, it may also be prudent to invest in a money market-linked account, for example, the MoneyFund Tracker for your business — which does all the hard work for you. It tracks the daily rates of an entire basket of qualifying money market funds and gives a great money market-related interest rate as it approximates the average of the top qualifying money market funds, without the volatility of being exposed to one single money fund.
Without a doubt, look for a cash solution that is as unique as your business. This means finding a banking partner that asks the right questions and is willing to build a relationship that allows them to truly understand the business, its cash flow cycles and external market influences, and then structure a portfolio correctly. This is what will give the business flexibility, security, guaranteed returns and, critically, access to the funds when they are needed most.
At Investec, a personalised approach ensures your business is seen as more than just a number. By thinking ahead and asking the questions that matter, we remove the hassle of managing your surplus cash. And with no monthly fees or commission on our cash deposit accounts, the appointment of your own dedicated business transactional banker, investing your cash flow has never been easier: you benefit from flexibility, security, personalised service, and, of course, guaranteed returns. This also means you have a banking partner who will support you over the long term.
Businesses will continue to face widespread disruption, and to ensure continuity, cash is a critical component, and must be examined over the short and long term. With a small amount of planning and guidance, you can achieve the combined benefits of accessibility, a low-risk investment option, and competitive interest rates that can make a fundamental difference to your bottom line, where your capital is protected. This is exactly what is needed today.
About the author: Sean Jackson is head of sales & distribution, business transactional banking at Investec.
Business Cash Solutions is a department of Investec Bank Ltd registration number 1969/004763/06 (referred to herein as “Investec”), an Authorised Financial Services Provider (11750), and a Registered Credit Provider (NCRCP 9). Investec is committed to the Code of Banking Practice as regulated by the Ombudsman for Banking Services. Copies of the code and the Ombudsman's details are available on request or visit Investec COBP.
This article was paid for by Investec.
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