RSS Feeds RSS | Views on ITInews | contact | terms of use | privacy 

Editorial Categories:


Become a Private Client at FNB

Forthcoming Events:

No Upcoming Events

FNB sponsors the homecoming revolution

Available Recruitment:

No Vacancies Listed...

Save by getting insurance quotes

Your Editor, Brent WilsonInforming Consumers and Financial Advisors since 1988 | Click Here to Advertise
How can we help you
Press Offices > Banks & Building Societies

First National Bank
Press Office Feature : Silly Season profits can make or break your business

Company: First National Bank
Author:Lwazi Stuurman
Email:[email protected]
Posted:19 Dec 2013

 Email this article Comment on this Article  Print this article

The holiday season is the busiest time of the year for many coastal business owners

For the business owner, it is also the highest cash flow quarter of the year.

According to Theunis Fourie, Head of Liabilities at FNB Commercial Banking, "A decision on where your holiday profits should go, and how you can grow that cash in your business, may well make or break your business in 2014."

"Money, spent unwisely, could put your business in a worse position by creating more business expenses or personal overheads."

Savvy business owners strive to manage excess cash for maximum return while minimising risk and maintaining adequate liquidity. However, it's essential to establish whether it is indeed excess cash?

"Sometimes, businesses end up collecting payment from clients early, before they have paid for essentials such as: raw materials, inventory and labour, that will be needed to produce a product or deliver a service."

"In this case, the extra money in the operating account isn't excess cash at all - it's just a temporary bump in the account balance until payables for cost-of-goods sold are disbursed."

"This money should usually be kept safely in the operating account to pay expenses as they become due," says Fourie.

There are three main objectives to consider when managing excess cash, including the following:

o Invest the money in safe investments that suit your risk appetite;
o Keep the funds as liquid as needed so they can be accessed to meet operating expenses, if necessary;
o Within these parameters, generate the highest possible return on the funds.

In today's environment of ongoing economic and business uncertainty, coastal business owners who rely heavily on the year-end season for their annual turnover should carefully balance the three primary objectives noted here when it comes to investing excess business cash.

Theunis cautions that, "No investment is risk free. Some can give a low yield and sometimes less than inflation, in which case you've lost money, and in extreme cases you could even lose the capital."

"Such a decision therefore requires proper planning for you to understand what you will ultimately be using the money for and when you will need it to be available to you."

"This will indicate your investment goals and timing projections and whether you should be going for a long- or short-term investment."

He says, "For instance, given the overall ebbs and flows of your business cash flow cycle, decide on the minimum cash balance that you're comfortable with."

"To do this, you need to determine how much working capital is necessary to meet your company's ongoing operating expenses."

There are a number of options to consider when planning investing that excess capital.

Some of these options allow you 100% of your excess cash from day one (at a cost) and at no cost after giving 45 days notice, and multiple notices are permitted.

For more guidance and assistance, you may want to talk to an Investment Specialist to help you analyse your cash flow cycle, determine an appropriate minimum balance for your operating account, and choose the right investment vehicle for excess cash.

There are no comments at this stage. Be the first to comment!
Please Login To Comment On an Article - Click here To Login

ITInews invites comments at the foot of each of its articles in which readers can respond freely - anonymously if they wish - to various topical issues and industry debates. However, comments submitted by readers that are defamatory or deemed, by the editors, to be racist or obscene will be deleted from the database. Furthermore, ITInews's editor would like to caution potential posters on its websites that while it welcomes robust debate, it will not hesitate to make the IP addresses of the authors of such defamatory statements available to the authorities, in the event of a court order compelling them to do so.

Get car, home, life and business insurance quotes in 3 easy steps

First National Bank

Get the One Account from First National Bank

More from First National Bank
Overview - 2016 National Budget
We are probably too late to implement and display evidence of growth
FNB makes tax-free saving quick and easy
Our top tip for saving is to pay yourself first
Sluggish economy to keep the small business sector highly vulnerable
Never assume that a loan is the only way out of tough times
Rate hike will bring in greater consumer caution
Households should budget wisely in anticipation of further interest rate increases
Key drivers of residential property selling
FNB estate agent survey reasons for selling property
Unchanged Repo rate: The best option for the household sector
Consumers should actively try to lower debt-to-disposable income ratio while interest rates are low
FNB launches first scalable banking website in Africa
The new website will be available to the public on Sunday 14 July 2013
Unchanged interest rate decision
Keeps the cumulative impact of monetary and fiscal policy on household sector negative
Inflation still impacts more on low income groups
At a time when the risk of social upheaval is not insignificant
FNB appoints new Chief Economist
Sizwe Nxedlana

Archived Articles featuring this company ...

Insurance Quotes

Car Insurance Quotes
Household Insurance Quotes
Business Insurance Quotes
Funeral Insurance Quotes
Life Insurance Quotes

Read the InsuranceQuotes Blog
ITM Website Design Cape Town
Copyright © 2005 - 2015 ITInews Online Publications (Pty) Ltd. All rights reserved Insurance Times & Investments Online and ITInews. ..::ISSN 1995-1256::.. No part of the materials including graphics or logos, available in this Web site may be copied, photocopied, reproduced, translated or reduced to any electronic medium or machine-readable form, in whole or in part, without specific permission from ITInews Online Publications (Pty) Ltd. Distribution for commercial purposes is prohibited.