How Manufacturers Should Manage Excess Cash

Excess cash is generally a sign of a healthy and profitable business. Manufacturers can accumulate significant cash reserves for a variety of reasons, including strong sales, low debt, seasonal demand, production fluctuations, and efficient cash management practices.

While excess cash is a good problem to have, it’s not all positive if you’re losing out on potentially higher returns from investment opportunities. 

How much cash manufacturers should keep on hand

It’s generally recommended businesses keep three-to-six months of operating expenses on hand. This can vary on the size and type of the business, as well as the ability to access credit and an owner’s risk tolerance.

How manufacturers should manage cash

While it’s highly recommended manufacturers have a solid cash reserve, there are many options to invest the reserve. Money market accounts may be an attractive option for businesses seeking a higher return rate on their cash reserves while maintaining liquidity and low risk.

How CLA can help manufacturers manage cash

Considering the continued high interest rates, our wealth management team recently explored options for businesses with excess cash. Learn more and get our team’s advice in this recent article.