NFP Cash Resources: Who Really Benefits?
Thursday, 15th July 2010 at 10:31 am
When it comes to an organisation’s cash flow most Not for Profits are getting short changed with a significant proportion of funds being held in transaction accounts earning little to no interest. Margaret Fewings, the Business Deposits Manager with ME Bank takes a look at Not for Profit cash resources and who really benefits.
Working for a Not for Profit organisation, you are probably accustomed to extracting the maximum from very limited resources; your team, your time, your suppliers and your networks. But when it comes to your organisation’s cash flow most Not for Profits are getting short changed.
According to the regulator there is $295 billion sitting in the deposit accounts of businesses, trusts and incorporated associations (APRA Insight September 2009). Unfortunately, a significant proportion is held in transaction accounts earning little to no interest. While you may not be getting much benefit from your surplus cash, you can be assured your bank is putting it to very profitable uses.
In my experience around a quarter of these organisation’s deposits sit idle from month to month in business transaction accounts. This translates to around $4,000,000,000 in interest that Australian organisations are missing out on every year at current interest rates.
As an example, about two years ago one of my Not for Profit clients working in medical research approached me about getting a better return on her organisation’s cash. They were keeping around $130,000 in their Westpac cheque account from month to month, but when we looked back over the last year’s cash flow we found month outgoings of between $20,000 and $35,000 a month. She decided to leave $40,000 in the cheque account, which included a margin for safety, and opened a Business Investment Account for the remaining $90,000. Over the past two years the client’s organisation has earned an additional $10,172 in interest and having the cash at call has been really important in managing fluctuations in their cash flow.
Thousands of organisations have already made the switch to an online business cash account, with 31% currently using the account up from 11% in 2005, according to Cameron Research Group. The accounts work by linking to your existing transaction account for added security and don’t normally carry any transaction fees. Transferring the cash is as easy as a few clicks on internet banking and is generally available the next business day when transferring between banks.
At ME Bank, our Business Investment Account, which pays 5.60% interest on every dollar invested, is one of the best accounts in the market. But we encourage you to compare for yourself. The independent finance comparison site, Infochoice.com.au, is a good place to start.
Interest rate is current as at 06/07/10 and is subject to change. Terms and conditions are available on request. This is general information only and you should consider if this product is appropriate for you. Members Equity Bank Pty Ltd ABN 56 070 887 679.