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Recognizing the Value of Your Business Cash




How to use short-term government backed securities with payroll/ benefits deductions



As the steward of your company’s cash, managing your financial resources effectively is critical to achieving financial stability and growth. Effective cash management can be the difference in your company’s ability to scale and ultimately deliver more value across its employees.


A significant source of spend for many companies that is often overlooked is payroll and its accompanying expenses. Payroll and benefits both have elements of float where dollars used for these functions spend time idle as cash before they are deployed.


For example, your contractors and vendors may have net payment terms that enable you to put your cash to use before it leaves your business. In the case of benefits, a bill may be due 15-30 days after its contracted services are completed. Each of these instances alone may seem insignificant, however together, a number of these people-related costs might amount to a significant portion of your cash that’s sitting idle as it waits to be used.

Rather than park your money in cash earning nothing as you anticipate these outflows, you recognize the value of deploying funds used for these functions into something that earns a meaningful yield in the meantime.


You recognize the value of your dollars.


What should you look for in a Treasury management approach?



Securities that Mitigate Risk

One of the key tenets of treasury management is minimizing risk associated with holding your idle cash. It isn't just about the return on your cash, but also the return of your cash. From this perspective, holding government backed securities is, by far, the safest alternative to your cash sitting idle at a bank.



The two best ways to hold government back securities are:


Holding Money Market Funds: These securities are very safe and stable because these funds invest in only very short dated government backed securities.


Holding T-bills: T-bills are the safest way to store idle cash because they are short dated debt issued by the U.S. government and come with the full faith and credit of the U.S. government. No other asset is safer than a U.S. T-bill.


Liquidity

Liquidity is essential to any cash management solution, but especially one that hinges on the ability to support the people who make your business run. Fortunately, buying into right sized T-bills for a duration that aligns with your liquidity needs makes it easy to convert those T-bills to cash when you need it most.


Active Management

Active management ensures that risk is minimized and yield is maximized. It requires evaluating an ever-evolving market and reallocating across investments accordingly. Active management is best achieved by a team that has a fiduciary responsibility to you and your assets.


Small and medium size companies should focus on their core competency: Running their businesses. Who (if anyone) manages your company's idle cash? With Treasure, you get access to our seasoned Investment Team with over 50 years of combined experience. It takes less than 10 minutes to open an account.


Get started at Treasurefinancial.com - and reach out to our team with any investment and treasury management questions.



Message from Steve Taylor, CEO of Thinq HR & Insurance Services on why we thought this piece made sense to share:




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