Traditionally, companies with cash, surplus to normal working capital requirements have placed those funds on deposit. However, with interest rates at a record low, directors could be increasingly concerned at the very poor returns available on deposit accounts. And with some banks threatening to charge a negative interest rate to hold money, potentially this is not good news for companies with surplus cash sitting in these types of accounts. Company investments – there could be a solution.
Investing surplus company cash
All companies need working capital that is readily accessible as and when they need it. In these circumstances, the company bank account is likely to be the most sensible place to deposit it. However, if they have more on deposit than they need, this surplus cash may well not be working hard enough for them. It may be a good time to look at an Investment for surplus Company cash.
One key reason is the record low interest rates. Individuals and Companies alike could be increasingly concerned at very poor returns available on deposit accounts. In fact, the news could be worse, they could find themselves paying a bank for the privilege of keeping their money on deposit as the prospect of negative interest is a real possibility.
A second key reason to consider investing surplus cash is that directors may be looking for any returns to be delivered in an environment of low volatility. The combination of these factors mean that an investment, with an appropriate underlying fund choice could be a more attractive investment opportunity for a company’s surplus cash rather than it sitting on deposit.
Things to consider when thinking about corporate investing,
Is there surplus cash to invest?
Are the record low interest rates a concern?
What accounting method is used and what impact this has on the amount of tax to pay?
This blog first appeared in Novemeber 2016 as a feature article for Rawcliffe & Co Chartered Accountants’ Blog. To stay informed with all issues financial & tax related, including key dates and important deadlines head over to Rawcliffe Blog.