Strategies For Cash Reserves Management

From April 2024, I started taking a fixed monthly salary. Before that, I took all the profits directly.  I used to think SackBerry and I were the same entity. But that's not true - if you want to grow a company, you must pay yourself a salary just like your employees. The remaining profits should be saved to build up 6-12 months' running costs as a safety buffer. Only after that should you start taking the leftover profits. Why did I decide to make this change? The main reason is that, as an agency owner, I don't want to go month by month. Having a difference between my personal savings account & company bank account has helped me if: 📍 A client ghosts me and doesn't pay at all. 📍 I hit a slow month. 📍 I want to experiment with new things: - new service - new resource - an expensive hire - new ways to scale In those situations, you still need cash reserves to pay your team for the next 1 year. Because they're working for your agency, not directly for the client. If you don't start saving up from the very beginning, you'll likely face these 3 consequences: 1/ With no savings buffer, a few delayed payments could leave you struggling to cover payroll and operating costs. 2/ If you can't reliably pay employees on time, your best talent will understandably jump ship. 3/ Without working capital reserves, you'll lack funds to invest in new capabilities, hire strategically, or explore new opportunities. So, what should you do? 1/ Live lean, save diligently, and pay yourself a reasonable salary. That separates you from the business and its needs.  2/ With healthy cash reserves, you can survive client non-payments, attract top talent by always making payroll, and be opportunistic about growth possibilities. It's tempting to take all the profits home when starting out. But that short-term gain risks crippling your agency's long-term potential. Won't you agree? #PersonalBranding #MarketingAgency

Liquidity Planning Wealth Is Not About Being Fully Invested. Most investors chase full deployment. The wealthy protect optionality. Being 100% invested feels productive. It is often fragile. Markets create opportunity without warning. Life creates need without warning. Liquidity is not laziness. It is readiness. Real liquidity planning includes: • tiered cash reserves • near-liquid asset layers • credit facility structuring • emergency capital allocation • opportunity reserves Not idle money, but patient capital. Illiquidity at the wrong moment forces selling at the worst moment. Liquidity at the right moment creates asymmetric entry. The question serious investors ask is not: “How much am I earning on idle cash?” It is: “Can I act when others are forced to retreat?” Because the best investments often appear in crisis. Only liquid investors can take them. Cash is not a drag. It is a weapon.

What's your plan if sales drop tomorrow—but expenses don't? In today's volatile market, having strong cash reserves isn't just good business practice—it's survival insurance. I've witnessed countless businesses crumble during downturns, not because their business model was flawed, but because they lacked the cash buffer to weather the storm. Here's what smart companies do differently: • Keep 6-12 months of operating expenses in liquid assets • Maintain separate accounts for growth opportunities • Review cash positions weekly, not monthly • Create clear triggers for when to tap into reserves The most successful companies I advise don't see cash as stagnant capital. They view it as strategic ammunition, ready to deploy when others are forced to retreat. During the 2008 crash, businesses with strong cash positions didn't just survive—they thrived. While competitors sold assets at discount prices, cash-rich companies expanded their market share at bargain rates. Think of cash reserves as your business's oxygen mask. When turbulence hits, you need to secure yours first before you can help others. Take a hard look at your current cash position. Are you truly prepared for unexpected turbulence? What steps could you take this quarter to strengthen your cash buffer? Let me know your thoughts on building strategic cash reserves. What's working for your business? An Indian Army veteran, have been helping entrepreneurs with a ‘Debt-Strategist’ for the last 30+ years. if you are not happy with your bank → Book a no obligation call today.

Managing Cash as a Cash Management solution provider: "Shoemakers' children have the worst shoes", or so they say... Recently, I discussed the challenges we faced in mastering our cash management, even as a cash management solution provider. In this post, I want to highlight the exceptional work of Quentin M. and his team in improving our surplus cash management through a mix of short-term and long-term investments. By striking a balance between short-term (3 days to 8 weeks) and long-term (2 months onwards) investments, we maintain the flexibility needed to fuel our ongoing investments in R&D and expansion, while simultaneously securing attractive long-term returns. Let me share quickly what their routine looks like. ➡ Short-term Investments The Finance team uses Agicap's short-term cash management view daily to monitor current cash balances and expected transactions per bank account. Their daily routine includes: 1️⃣ Ensuring the reliability of expected transaction data. 2️⃣ Making internal movements to secure incoming payments for the next 2-3 days. 3️⃣ Identifying cash excess in current accounts for potential investments. 4️⃣ Investing in or withdrawing from short-term investment instruments: - Interest-bearing deposit accounts / Savings accounts - currently ~4%. - Short-term oriented corporate bonds issued by our banks (UCITS) -currently ~3.8-4%. ➡ Long-term Investments Our long-term investment strategy is based on our cash flow plan and forecasts, which rely on both actuals and business plan assumptions. We identify cash excess for the next 2 to 12 months and apply a safety margin of ~10% to ensure we can handle uncertainties and short-term expenses. Twice a month, Quentin reviews our current investments and market trends: 1️⃣ Re-assessing current rates and forwards to identify better investment opportunities. 2️⃣ Re-evaluating maturing investments with two options: a) continue in our current investment b) re-invest in other vehicles. Our cash is primarily invested in fixed-term deposit accounts with fixed or variable rates (EURIBOR), depending on the context (currently averaging ~4%). At Agicap, we prioritize liquidity and avoid taking unnecessary risks: 1. We diversify our investments across all our main banks to mitigate counterparty risk (bank default). It also allows us to have competitive offers from our banks (rates, fees, minimum amounts, duration, etc.). 2. We do not invest in terms exceeding 12 months : - Due to our fast growth mode, our detailed business plan and associated cash forecasts do not exceed 12 months. - We require a high level of flexibility, so all our investments are liquid within 32 days. Maxence Gazelle Emmanuel C. Florent Vimort

How I make sure our agency never runs out of cash. (and built over $1 MM of cash reserves). ((which now earns 5-figures p/m in interest)) Every agency owner on the planet, whether 1 person or 200, has worried about cash flow at some stage. Maybe that’s right now for you. That’s okay. It’ll pass. And there’s a way to make sure you never worry again. There are two key principles: 1. Building cash reserves (and making them “work” to earn more) 2. Managing salary load (how much of your fees you spend on staff - the single biggest cost for any agency). FIRST PRINCIPLE For cash reserves here are the rules: - Target 4.5 months of operating cost - So if your agency costs $10 K a month to run, you need $45 K min - To build the reserves, put ALL profit into them until you reach 4.5 months - And then 30% of profit quarterly even when you’re above target (keep stashing) - if you dip into them for a rainy day (or month(s)), repeat as above before any further profit taking NEXT - Invest the reserves. - This could take years but the principles apply from day 1. - 18 months ago we put $1.5 MM cash into a high savings interest account. - In Dec-23 it matured and paid out $155 K interest. - This went straight back into reserves (owners don’t touch this, it’s not profit, it’s appreciation of company stockpiles and should be used to invest in growth). Build reserves at all costs. Sacrifice short term ownership payouts. This way, when rough seas come (they always do), you don’t panic and make SNAP decisions that harm growth. SECOND PRINCIPLE This one is less verbose. Look at your GP (fees), and don’t spend more than 45% of it on HR. Do the calculation today and see where you are. ~~Staff comp (inc. benefits)/gross profit x 100 = salary load % ~~ If it’s above 45% you have two options: - Increase GP - Decrease HR You’re doing no-one any favours by ignoring this. The wisdom of 45% or less is that your agency could LITERALLY afford to lose half its customers overnight and still not go in to negative cash flow. ———- There you have it. With 4-5 months cash reserves (and ever building) and a 45% salary load you never need to worry about surviving the month or making payroll again. Other stuff to worry about? Of course. Still have to make tough decisions if revenue slides? Yep. But not knee-jerk. Strategic. ———- P.S. when your reserves are way over target, you have a “free hit” at growth initiatives with the surplus… … invest in more risky growth exercises — if it pays off, the cost is amortised over time and doesn’t come out of cash flow. If it doesn’t, no harm no foul.

Financial Planning in an Era of Economic Uncertainty: CFO Best Practices in 2024 In 2024, CFOs are facing significant economic challenges, including inflation, supply chain disruptions, and market volatility. A key strategy is scenario planning, which allows CFOs to prepare for multiple economic outcomes. By developing financial models that account for different inflation rates and market conditions, companies can adjust their strategies in real time. According to McKinsey, 55% of CFOs now use scenario planning regularly to mitigate risks. Advanced risk management tools, such as predictive analytics, are also being employed to detect potential disruptions in supply chains early. Additionally, CFOs are focusing on liquidity management. Keeping a strong cash position is crucial, as 2024 has seen a 25% increase in companies holding larger cash reserves to manage unforeseen economic shifts. CFOs are cutting non-essential spending and re-evaluating capital expenditures to prioritize long-term resilience. These measures, coupled with flexible financial planning, help companies weather economic turbulence while positioning themselves for growth. Invest in the future. Prioritize financial strategies that turn uncertainty into opportunity.

Revenue is great. Profit is better. But cash? Cash is king. Here’s the reality for most professional service firms: They track revenue. They track profit. But they don’t think about cash until it’s too late. Here’s my rule: Aim for at least two times your monthly overhead in cash reserves. Why? Because cash gives you options. - It helps you weather tough months. - It lets you invest in growth without hesitation. - And it keeps you from making panic decisions. Let’s say your monthly overhead is $500K. With $1M in reserves, you’re operating from a place of strength—not stress. But most firms aren’t there yet. And that’s okay. It’s a ramp, not a leap. Start small: - Commit to building reserves over time. - Balance your distributions with the business’s cash needs. - Think long-term, not just month-to-month. Cash flow isn’t just numbers. It’s control. What’s your cash reserve strategy? If you don’t have one, it’s time to start.

Liquidity Buffers Framework for Treasury Leaders Liquidity buffers should not only be defined by comfort levels or general policy language. They must be structured, quantified, stress-tested, and aligned with the company’s risk profile. A disciplined liquidity buffer framework answers 3 questions: 💫 How much liquidity is required? 💫 What type of liquidity instruments should make up the buffer and in what proportion? 💫 Under what conditions is it deployed? Below is a practical high-level framework treasury teams can apply. 1. Define Coverage Requirements Liquidity buffers should be calculated against measurable exposures. Treasury should quantify: -Debt maturities within the next 12–18 months -Forecast net cash outflows over a rolling 13-week period -Seasonal working capital swings -Contingent obligations 2. Distinguish Liquidity by Accessibility Liquidity must be segmented based on availability and timing. Treasury should classify: -Immediate Liquidity On-balance-sheet cash Cash equivalents Undrawn committed revolving credit facilities -Secondary Liquidity Short-term investments with minimal liquidation risk Intra-group funding capacity Backstop facilities Accessibility determines reliability during stress or uncertain market conditions. 3. Integrate the Buffer into Cashflow Forecasting Liquidity buffers must be embedded into the rolling cashflow forecast process. Treasury should: -Compare projected liquidity against minimum buffer thresholds weekly -Flag projected breaches at least 8–12 weeks in advance -Align forecast variance tracking with buffer adequacy If forecasting discipline is weak, buffer assumptions will be unreliable. 4. Apply Downside Stress Testing Liquidity planning should incorporate defined downside scenarios. Treasury should model: Revenue contraction scenarios Delayed receivables or extended DSO Interest rate shocks affecting floating-rate exposure Buffers should withstand credible stress conditions, not just base-case assumptions. 5. Establish Governance and Escalation Triggers A liquidity framework requires formal governance. This includes: -Board-approved minimum liquidity thresholds -Defined escalation triggers if liquidity falls below target levels -Monthly reporting of available vs. required liquidity Annual policy review tied to market conditions and business changes. Liquidity buffers are a structured risk management tool designed to preserve operational continuity and funding flexibility. Treasury leaders who define, measure, and stress-test liquidity buffers systematically maintain negotiating power and strategic choice, even during market uncertainty. Liquidity risk is rarely caused by sudden shocks alone. It is usually the result of insufficient preparation. As holding liquidity in the wrong currency introduces basis and conversion risk.

What Should we do with Cash Now that Interest Rates are going down? There’s a lot of chatter in the news right now about what to do with cash now that interest rates are going down. The answer for how much to have in cash doesn’t change because of interest rates. It’s always a good idea to have a baseline of cash reserves for emergencies and funding short-term goals, REGARDLESS of where interest rates are at any given time. The general guideline for an emergency cushion is 3-6 months’ worth of spending needs in available cash at all times, but the recommended amount can vary based on your life stage and situation. You also want to keep any funds that you plan on spending in the next 2 years or less in cash or cash equivalents.  These could be funds for an upcoming vacation, home remodel, or down payment.  You want to keep these funds in cash equivalents (bank accounts, CDs, money market accounts) so that the value doesn’t fluctuate with the market.  That way the amount you need is there when you need it. Any funds that are invested for longer term goals like retirement that are several years or decades away should be invested to grow and beat inflation over time. Interest rates changing doesn’t change what you should have in available cash, it just changes the yield on that cash. #interestrates #cashplanning CGN Advisors, LLC

"The Real Cost of Playing it Too Safe with Your Money" During 2007-08, I parked my savings in "safe" fixed deposits, waiting for the "perfect" investment moment. Looking back, that was a costly lesson. Here's why, and what I learned about smart money management: 💰 3 Key Investment Insights: 1️⃣ Cash Needs a Clear Purpose Keep cash for: - Emergency fund (3-6 months of expenses) - Near-term large purchases - Strategic opportunities But remember: - Indian inflation at 6% vs FD returns of 7% - Real returns = 1% before taxes - That ₹10L becomes ₹9.4L in purchasing power after 5 years 2️⃣ Regular Investing Beats Perfect Timing My biggest missed opportunities came from: - Overthinking until prices climbed higher - Waiting for "perfect" entry points - Trying to predict market crashes Reality Check: ₹10k monthly SIP in Nifty50 since 2023 would be up 18% today 3️⃣ Follow Buffett's Real Advice The Oracle of Omaha actually recommends: - Regular investment in low-cost index funds - Long-term holding (10+ years) - Avoiding market timing 💡Pro Tip: For young investors, consider: - Automating 15 -20 % of income into diversified investments - Building an emergency fund first - Using tax-efficient options (ELSS, PPF) - Staying invested through market cycles Remember: Balance beats extremes. Don't confuse prudence with paralysis. What investment strategy has worked best for you over the long term?