All the answers to your unique business lifestage questions
It was Bill Gates who said, “A company’s ability to respond to an unplanned event, good or bad is a prime indicator of its ability to compete.” It’s advice well worth remembering.
What happens when you need to pay legal fees related to an unexpected lawsuit, your equipment breaks, or you have to pay a customer’s damage claim? Planning can only do so much, so if you are fortunate enough to be able to, set aside any extra money you may have to help protect your business in the case of an unexpected event.
Quick access to liquidity is important. Banks offer a variety of investment products, including short-term savings and investments, which offer immediate access to funds. It’s important to choose the savings or investment accounts that suit your specific needs. Also, always consider the cost of making the investment you choose, so always ask about bank fees and interest rates.
Standard Bank offers the following investment options:
1. Call Deposits
These are ideal for small businesses that wish to earn good interest rates while having immediate access to and full control of the funds in the account. You need a minimum opening deposit of R1 000. Interest is calculated on a daily balance and is re-invested monthly. The higher your account balance, the higher your interest rate. A minimum of R1 000 is required for deposits and withdrawals.
This card-based investment account gives you the flexibility of a transaction account while you earn competitive interest rates. This account is ideal for businesses that want the convenience of performing simple transactions from their investment account.
You need a minimum opening deposit of R5 000 and you have immediate access to your money. Interest is calculated on your daily balance and is paid into your MarketLink account every month. The higher your balance, the higher your interest rates, and the true interest benefit is seen with investments of R20 000 and more.
3. Money Market Call
This is a premium money market investment account that earns you highly competitive interest rates and the funds deposited are available on demand. This account is ideal if you have a business that has large amounts available to invest and require immediate access to funds.
You need a minimum opening deposit of R100 000, and you’ll have the flexibility of making an unlimited number of deposits and transfers into the account provided a minimum transaction amount of R5 000 is maintained.
4. 32 Day Notice Deposit
A notice deposit is an investment account that earns you interest, but to access your money you must give 32 days’ notice. The 32 day notice deposit is suitable for businesses that wish to earn higher interest by sacrificing immediate access to funds.
5. Fixed Deposits
A fixed deposit is an investment account where funds are deposited for a fixed period and the interest does not fluctuate during the investment term. This is perfect for your businesses if you want to invest a lump sum of money and will not require access to it for a specific period of time.
There is no real benchmark for how much spare cash you should set aside for a rainy day in relation to your business’s turnover, but it’s a good idea to talk to other business owners who operate similar types of businesses as you and find out what their cash flow benchmarks and typical operating expenses are. Networking is important here – by joining business chambers and attending events, you are likely to meet people who will be willing to share non-sensitive information with you.