Where to park cash from your business

Once your practice is humming along nicely, what’s the best way for managing cash in your business?

 4.5 minutes

Owning your own practice is a major accomplishment. As a busy doctor, dentist or vet, once you’ve reached that milestone, it can be difficult to know how to consolidate all your finances to ensure any extra cash coming in is used to its best potential. It is comforting to know there are many choices available to assist you. To help you make the best decisions as to how and where to park cash from your business, here are some of the options available to business owners.

Are business transaction accounts the answer?

Before deciding what to do, it is important to identify what not to do when opting to park cash from your business.

BOQ Specialist’s Chris Reid explains: “One of the flaws a lot of practice owners will fall into is putting all their excess cash into their business transaction account.”

Historically, business transaction accounts earn very little interest. While this will depend on who you bank with, often business owners use these accounts as they think they need the cash flow.

The first step in managing excess cash

For most business owners, identifying your short-term cash flow requirements is an excellent starting point.

Start with working out your needs for short-term cash flow as it should be kept as liquid as possible. Once you have identified your cash flow for the next month, the best way to keep this cash as liquid as possible is in an everyday transaction account.

Spreading the rest of your funds

The rest of your funds should then be spread among a range of other products available to you. This will allow you to plan and maximise your return. For cash that doesn’t need to be easily accessible, higher interest savings accounts provide excellent returns.

There are some good financial products in the market that are geared towards getting the most out of your money.

One example of this is our 32 day notice account, which provides higher interest than an everyday account. It functions like a savings account, but with the requirement that you give 32 days notice to pull your funds out.

Term deposits as an option

In contrast to higher interest savings accounts, adding a portion of excess funds to a term deposit can also be beneficial for your business. Locking your funds in for a set period of time, whether 30 days, 90 days, or even five years can maximise returns.

Once your term deposit matures, you get to make the call on what happens next, whether you roll it over and continue in a term deposit or pull the funds out.

The process of setting up shorter term deposits but rolling the funds over is referred to as layering, and here Mr Rajakumar says, “Layering money is the best way to be able to maximise the business and individual returns for your savings”.

To get your cash from humming to singing

Spreading some of your excess cash between your everyday transaction account and a notice account or term deposit is an efficient way of getting the most from your money.

While it remains sufficiently available to cover any unexpected bills, making the most of these other accounts ensures your money continues to work for you—even when you’re not using it.
 

Looking for a dependable yield from your income or savings? Click on the link to learn about our fixed term deposits. Ready to take the next step? Contact us to find out how we can tailor a finance solution for you, or call us on 1300 131 141.

 

 

BOQ Specialist - a division of Bank of Queensland Limited ABN 32 009 656 740 AFSL and Australian credit licence no. 244616 (“BOQ Specialist”).

The information contained in this article (Information) is general in nature and has been provided in good faith, without taking into account your personal circumstances. While all reasonable care has been taken to ensure that the information is accurate and opinions fair and reasonable, no warranties in this regard are provided. We recommend that you obtain independent financial and tax advice before making any decisions.