Negative Impacts of Excess Cash and Cash Equivalents in Business

[Suba]

As a business owner or financial manager, you must at least be able to manage cash effectively and create optimal cash planning. However, unfortunately, many business owners/entrepreneurs hold excessive amounts of cash, exceeding their business needs, or have a slow cash turnover, indicating ineffective business performance. Some of the negative impacts of holding excess cash and cash equivalents include:
1. Suboptimal business profitability
2. Not utilizing excess cash for investment
3. Slow business growth
4. Risk of inflation, etc.

 

[neku]

For domain sales, domain investors often receive a large amount at a time, and they often pay a large amount for domain renewals. The credit bill is paid only once a month, due to which they may have more money in their account for less than a month, usually a week.

 

[Starmix]

The business owner does not realize what he misses, like the opportunities that let his money grow by investing it. He must roll his money to add up the profit to his capital and savings.

 

[Springtime]

Holding too much cash on hand will not help the business. You'll miss the opportunities which enable the company to grow.

 

[eLdavis]

Holding too much cash on hand will not help the business. You'll miss the opportunities which enable the company to grow.

Very true, there is a popular saying that you need to spend money to make money, so if you want to make money, you do be willing to release some.

 

[Augusta]

Holding on to more cash than you need, rather than investing it, raises the risk that you may not achieve your investing goals.

 

[Starmix]

It also depends on the decision of the business person on what to do with his money. It's his prerogative whether to carry or not to carry cash at home. He might have reasons that cannot be disclosed.

 

[Kross]

Even if the business has excess cash, they could deploy it for expanding the business rather than holding it. It doesn't make sense to hold excess cash.

 

[Augusta]

Yes no need holding excess cash you should rather invest it. It would make more sense this way