Cash Management Optimizing Liquidity CS Solutions for Entrepreneurs and Executives

Checklist: Optimizing Excess Liquidity

Are you trying to improve how you use and administer your company's excess liquidity? This checklist can help you examine possible steps and solutions for your business and its assets.

1. Is the subject of managing surplus liquidity important to me as a business owner?

Besides general considerations regarding yield, the current environment of low interest rates is an important reason for businesses to take a closer look at investing their assets. That is because reducing liquidity can help you avoid the risk of negative interest rates or even lower the expenses being passed on to you by banks.

2. How much cash do I need on hand to run my business?

Your need for liquidity depends heavily on your business model. Frequently, part of that liquidity is not necessary to operate at the company level, and it exceeds the target amount for a strategic reserve (also known as a "rainy day fund"). How much money your company keeps on hand in addition to your rainy day fund is also a strategic decision.

3. What things do I need to consider before removing liquidity that I don't need for my business?

Carefully examine how much liquidity you actually have at the corporate level but do not need to operate. That is because many entrepreneurs view the liquidity at the corporate level as semi-private assets already and forgo shifting it to their personal accounts. To correctly assess your company's financial situation, you need transparency into your operational assets, the assets held by the parent company, and your pension and private assets. Check to see whether the balance necessary for a long-term strategy exists in these areas. If necessary, make an adjustment to your withdrawal strategy first.

4. What things do I need to keep in mind when investing at the corporate level?

Here, there are two important aspects to consider. First, the framework conditions that apply to investing private assets and investing business assets are different. When a business invests its assets, any capital gains are also taxable – unlike the general rule for private individuals who hold their assets as personal assets. Second, you should make sure that your company's stated purpose allows for investing of funds not needed for operations, that the board of directors approves of the investment or has delegated that decision to the management, and that the company has a set of investment regulations with principles of asset management.

5. How can I invest the accrued liquidity successively?

One possible solution is known as a sweep account. That is an investment account into which excess liquidity from other accounts is "swept" regularly and automatically so that the funds can be invested as instructed by the client.

6. What steps do I take next?

If possible, you should perform a quick initial analysis based on the points outlined above and then get in touch with us. You can examine all further steps together with us. We offer existing clients an initial subject-related consultation or initial meeting as part of more detailed consultation free of charge.