Free Cash Balance (FCB)

Free Cash Balance (FCB)

 

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Knowing your FCB will make you more confident in business.

It's month end, and your accountant just reported to you that the company's bank account has a balance of $100,000. What's the value of this information to you? Does this piece of information make you happy or sad or Don't Know?

The answer lies in knowing your FCB.

FCB is your total Cash Balance less all Restricted Cash usage.

 

Restricted Cash refers to those Cash in your company bank account which you literally "can not touch", examples of "restricted cash" are :

1. Fixed Deposit
2. Deposits secured to the bank for Corporate Credit Card
3. For CFO, also means Cash needed to set aside for next 2 weeks for Rentals, Staff Payroll, CPF remittance, GST GIRO deduction, Bank Loans Repayment, Hire Purchase repayment, etc.

Coming back to the earlier case of $100,000, if total "Restricted Cash" is $60,000, then your FCB would only be $40,000.

Would FCB of $40,000 be a good balance to you to make you happy ?

It would be a good balance if you expect "new cash" flowing in within next 2 weeks, which you can literally use this $40,000 for short term investments to earn a Return on your idle cash sitting around.

So from now onwards, ask your accountant to report to you "Restricted Cash" and FCB too.

Only a good FCB would make your day.

Hope this little tip helps.

If you need help, feel free to contact us at :

(O) +65 63851011

(M) +65 90880669

(E) enquiry@corporatebackoffice.com.sg

www.corporatebackoffice.com.sg

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