As a business owner, you’ve heard the phrases “cash is king” and “cash management” from financial gurus and business commentators. A diligent review of your monthly cash balances, existing banking arrangements, and product mix is important.  With some focus, you can eliminate ‘dead cash’ and compensate yourself with interest.  A cashflow forecast is an essential tool to maximize your cash returns and minimize costs.  A few important questions to ask when completing the forecast:

WHAT IS MY CURRENT CASH MANAGEMENT STRATEGY? 

If you have one, great!  Review and optimize based on your current situation.  If there was never a defined goal or strategy in place, here is your chance to review and understand your options.

WHAT ARE YOUR DAILY, WEEKLY, AND MONTHLY CASH NEEDS?
Every business has its own unique sales and payments cycle.  Even clients within energy services have varied philosophies of when items are to be paid or invoiced and on what terms. If there is always a significant balance in your transactional account(s), it would be prudent to either set aside the money in a liquid business investment account (BIA) or short-term GIC.  With a BIA, funds can be transferred online the same day into your transactional account. This makes it accessible on short notice if required.

DO YOU HAVE ANY PROJECTS OR REMITTANCES DUE IN THE NEAR-FUTURE?

Looking at segmenting the cash necessary for future equipment purchases or known government remittances can enable you to set aside funds into short-term investments.  This way you won’t run into a cash crunch when the item is due, and you earn income prior to payment.

CASH RESERVE FOR SEASONALITY?

The energy service sector is noted for being seasonal.  Segmenting a portion of your cash in an interest-bearing account can offer a buffer for the spring.  If you have a term-loan credit structure that requires principal payments through the months of April to June, an account to allocate the expected payments and earn interest in the interim is beneficial.

WHAT ARE YOUR EXPECTED TRANSACTIONAL NEEDS?

If you require your cash balance and can’t benefit from short-term GIC’s or a BIA, there are transactional accounts that can offer interest. A client recently asked about what to do with higher than normal balances in their transactional account. They didn’t want to sacrifice liquidity but wanted some benefit of the higher balance(s).  By entering into a tiered deposit account agreement, the client benefited from interest income on their fluctuating balance.

WHAT RESOURCES ARE DEDICATED TO BANKING AND DEPOSITS?

Consider the time and effort to manage your day- to-day banking.  Electronic banking offers many features that increase efficiency and allow you to closely monitor your account.  National Bank’s online platform offers a user-friendly environment to manage your accounts, loans, foreign exchange (including hedging), and international trade needs at very competitive pricing.  Streamline your payment process by considering electronic payments, which are more efficient, less costly, and reduce your exposure to cheque fraud, which is becoming an area of increasing concern for businesses.

We assist you in selecting the right solution from a range of deposit products to fit your needs and thereby adding to your bottom line and the success of your business.  Make your cash work for you!