Launch · Investments
Posted on June 28, 2024
Understanding the concept of idle cash and why cash management is essential.
Having a lot of cash just sitting in your bank account might not seem like a big deal, but if you're not putting it to good use, it can actually lose value over time. Many small and medium business owners often have extra money between pay periods and long holidays. This money, which isn't earning any interest, loses value because of inflation.
So, what's the deal with idle or surplus funds? Idle funds are money not being used for anything specific or invested in something that can make it grow. A plan for this extra cash ensures it works for you, either by developing your business or personal wealth, instead of just sitting there and losing value.
Why let your money sit in a regular business account, earning little to no interest when low-risk investment options exist? That's where Infinity comes in. It helps your business manage extra cash by exploring different investment options like government securities and mutual funds more quickly and efficiently, creating a personalized portfolio for idle cash.
Opportunity cost if left uninvested.
Understanding and managing the opportunity cost of idle cash is vital for businesses to ensure their funds are working effectively towards growth and profitability rather than diminishing in value due to inflation or underutilization. Sometimes, companies have idle cash because they can't find good investment opportunities. Making the right financial decisions quickly can make a big difference in cash management. That's why having the right tools to reach your financial goals is essential. Infinity will help you navigate these challenges by showing you all the opportunities, risks, and potential interests, helping you make well-informed decisions based on your needs.
Suppose a Bangalore-based tech startup has INR 20,00,000 in idle cash. The startup is considering two options for this money:
Keep the cash idle and not invest anywhere.
Invest the cash in government bonds with an annual interest of about 7%.
Analyzing the opportunity cost of keeping the cash idle, the return after one year is INR 0 (no gain). The return on investing in government bonds with low risk and moderate return after one year is INR 1,40,000, which converts the idle cash into 21,40,000. This example illustrates the significant potential gains that startups might miss out on by not investing their idle cash into low-risk investments like government bonds, compared to leaving their money idle.
Why Infinity?
With Infinity, startups and businesses can transform their idle cash into a powerful tool for growth, ensuring that every penny is strategically invested to support long-term success and stability. This approach maximizes returns and aligns with the startups' broader business objectives, paving the way for sustainable growth and innovation. Infinity can guide your business to make more money by determining the interest the company could earn from different investments and by providing a personalized investment plan for your idle cash.