03 Jun 2019

Don’t sacrifice high returns for accessibility

Digital content team


It’s a story that we hear often in the small and medium enterprise space. You’ve established a successful business, the result of years of applying innovation, passion, customer understanding and simple “sweat equity” to build your enterprise up to what it is today.

One result of years of growth for many successful businesses is having the luxury of a cash buffer to call upon. Ideally, so the experts tell us, you’d want to be channelling that extra cash into investment in new growth opportunities. But in difficult economic times, where you’re having to work extra hard to maintain market share and margins, or where growth opportunities are hard to come by, that isn’t always a viable option. So keeping some cash aside for a possible rainy day – or a growth opportunity once the economy starts to improve – isn’t a bad idea. 

You could place your money in a longer-dated deposit and earn a good interest rate but this means locking up your cash for an extended period...

Businesses’ cash buffers often sit in low-earning call accounts. The advantage of this approach is that the cash is available at very short notice, either to meet an unexpected expense or to take advantage of a business opportunity. Unfortunately, you sacrifice earning a decent return on these funds – leading to what some call “lazy money” or a “lazy balance sheet”. 


You could, of course, place the money in a longer-dated deposit and earn a good interest rate that way. However, this means locking up your cash for an extended period of time, robbing you of your flexibility and forcing you to use your overdraft or other debt facilities more than you would want to – offsetting whatever return you are earning on your deposit. 


Luckily, there are cash investment opportunities now available for small and medium enterprises, says Sean Jackson, head of Business Cash Solutions at Investec Bank. These help to avoid having to choose between the rock of a “lazy balance sheet” and the hard place of having to borrow.  


“With a little bit of planning, businesses can achieve the combined benefits of accessibility to cash, alongside earning a competitive rate,” says Jackson.

There are a number of flexible notice products available for businesses, meaning you’re able to select one that works best for your unique cash flow needs. 

Jackson says that flexible notice deposits allow businesses to bridge this gap between returns and accessibility. “Unlike typical notice products, which lock your amount of capital up for a predetermined time frame, flexible notice products allow you to benefit from the higher interest rates available on longer-term deposits while at the same time giving you immediate access to a percentage of your capital,” he points out. 


“There are a number of flexible notice products available for businesses, which means you can select a variation that works best for you, taking into consideration your unique cash flow requirements.” 


“Notice deposits are also ideal for firms with lumpy cash flows. Money collected at high inflow times of the year can be placed in a high-earning notice deposit, and then drawn on at later intervals,” Jackson adds.

Learn more about Investec's flexible notice accounts for business

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