Does the need for liquidity mean you have to leave a lot of cash in a low-interest-bearing checking account? The answer is “no.”
To be clear, liquidity means that cash must be available when payments are actually being made. In many cases, entities are putting cash aside for “just-in-case” scenarios, thus leaving unneeded cash in low-interest-bearing checking accounts.
As interest rates rise, more options have become available to invest cash—while still allowing one to have liquidity when needed.
As we see it, liquidity means having cash available when at the moment you need it—but not any sooner. By applying this “just-in-time” philosophy, the options to put your cash to work expands from your bank account to Certificates of Deposits, Treasury Bills, State Liquidity Pools, and Government Money Market Funds with Constant NAV (where legally permitted). That’s just to name a few.
At three+one we can provide you with a liquidity analysis that encompasses all of your operating and non-operating cash. We can then tell you exactly when your entity will need cash and the value of your cash in the meantime.
Knowing how to use liquidity to full advantage will enable you to better manage your cash flow needs and maximize the value of your cash in the marketplace. By applying this kind of thinking, you’ll achieve higher-interest earnings on your bottom line.
We’d like to welcome Alex DeRosa to the three+one team! He’ll be helping out our clients in Western NY, Pennsylvania, and Ohio.