Cash is the lifeblood of any business operation and it?s particularly important to make sure your cash is housed correctly so it doesn’t leach away through unnecessary fees and charges or lack of interest rate earnings. The first thing to do is decide how much is the “Now” cash and how much is the “Later” cash. “Now” money consists of the cash you need to run the business on a day-to-day basis. This would include rent, all regular overheads, wages and supply payments. ”Later” money is money put aside in the good times. This can be used to either tide the business over in lean times or invest in new plant and equipment, or perhaps an associated project. Every business operates differently but there are 4 key money-minding account types which are beneficial to business owners when used correctly.
Business Transaction account
The heart of business banking where money is constantly moving in and out, a good transaction account will be cheap to use and have a wide range of access channels such as branch, cheque, internet and Bpay. In return, expect to receive minimal interest.
Online Savings Account
This type of account offers a much better interest rate than a transaction account. It?s worth investigating the two accounts with your bank so you can “sweep” any excess money from the transaction account into the online saver. You?ll earn a higher interest rate and your money is available for use straight away if you need it. Check any requirements such as regular deposits and zero withdrawals before opening an online saver.
Cash Management Account (CMA)
This is essentially a savings account which pays interest but doesn?t have a full range of transaction methods available. Generally, CMAs offer a decent amount of interest on higher balances which are available on call if you need to withdraw money when, say, an investment opportunity arises. You can certainly transact on a CMA but it will not be as cost effective as a dedicated transaction account for numerous transactions. Combining a low cost transaction account with an online saver from the same institution can be a better option, although CMAs are still relevant, as there are plenty of people who like the idea of a versatile account that can earn interest and let them transact.
Term Deposits
These are high-interest accounts where your money is locked away until the agreed date of maturity. If you have money that you know you won?t need access to for a few months to years than a term deposit may be right for you. Term deposits are available over various time frames. In return for locking in a high interest, be aware that penalties may apply if you need to access your money before the maturity term. These usually comprise partial or full forfeiture of interest.
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