Why your business should invest its excess liquidity
Create growth
Having a surplus in your business capital means that you have more money available than is needed to cover ongoing operating costs and is simply because your business is doing well. There is an opportunity to invest and create growth in these.
Put the capital to work
It is important to put the capital to work, not just leave it in a low-interest account. Good returns on excess liquidity create greater opportunities in the future for survival, repayment to shareholders, and investment, for example. Many people's business capital savings problem is that inflation eats up the return from a low interest rate.
Inflation eats up interest returns
An inflation rate of, say, 2% means that every million kronor of capital decreases in value by SEK 20,000 per year. The interest on the savings account is generally eaten up by inflation, and there is no increase in value. Failure to invest surplus liquidity, therefore, has a longer-term impact. It is essential to have a buffer against unexpected expenses. However, keep the money in an account that gives you savings interest on the capital.
Optimize finances and increase profits
Capital that exceeds the buffer requirement is suitable for investment and yields a return. It will generate income outside the company's operations, and by making the best use of your surplus, you can optimise the economy and thus increase profits. The risk of the investment should not compromise the overall objective of preserving the purchasing power of the capital. In this respect, it is advisable to choose an investment that, first and foremost, can offer stability on the downside but simultaneously provide a good return in both the short and long term.