Tuesday, April 16, 2024

Money market funds useful tool in small businesses’ cash flow management – Enwealth

By Amos Mzenge

For Kenyan small businesses, navigating the unpredictable waves of cash flow can feel like steering a boat in a storm. One moment, your coffers are overflowing with client payments, the next, expenses leave you scrambling for dry land. This constant uncertainty hinders growth and makes financial planning a blur.

But fear not, dear entrepreneurs! There’s a financial tool lurking in the Kenyan market, waiting to be your anchor: Money Market Funds (MMFs).

Think of MMFs, such as the Enwealth Money Market Fund as a safe haven for your excess cash, offering high liquidity (easy access) and competitive returns compared to traditional savings accounts. But MMFs aren’t just glorified piggy banks; they can be strategic allies in your cash management and liquidity planning battles. Here’s how:

Smoothing the revenue rollercoaster: Every business experiences peaks and valleys in income. MMFs act as shock absorbers, allowing you to park surplus cash during good times and readily access it when business slows. This prevents scrambling for emergency loans or dipping into working capital, ensuring smooth operations even during lean periods.

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Optimizing idle cash: Business owners often hold onto cash due to fear of missing opportunities. This is often in their mobile money account or current account at a bank both of which do not offer interest on such deposits. With MMFs, that idle cash earns returns, boosting your bottom line without compromising accessibility. Think of it as putting your cash to work while you take a coffee break.

Budgeting with Confidence: When your cash flow is clear and predictable, budgeting becomes a breeze. MMFs provide transparency into your available funds, enabling you to forecast expenses and make informed financial decisions

Minimizing Risk and Maximizing Returns: Compared to riskier investments, MMFs offer low volatility and capital preservation. Your money works for you without exposing you to excessive risk. Remember, peace of mind is priceless when running a business.

But before you dive headfirst, there are some key considerations you need to have in mind. Firstly, ensure that you choose wisely. Research and compare different MMFs offered by licensed and reputable Fund Managers. Consider factors like fees, minimum investment amounts, and return history.

Secondly, align the investment with your needs. This involves determining your cash flow patterns and liquidity requirements. This could be from your budget or historical transactions. Then, you can opt for MMFs offering flexible withdrawal options that match your needs. While some allow instant withdrawal, others have a two-day waiting period.

Lastly, do not forget the big picture. While MMFs are valuable tools for efficient cash management and strategic liquidity planning, they are not replacements for long-term investment strategies. Consult a financial advisor to create a holistic investment plan for your business and yourself – say retirement planning.

By embracing MMFs, Kenyan small businesses can transform their cash flow from a chaotic storm into a predictable breeze. By simply educating themselves on how MMFs work, researching to find the perfect fit, and approaching the investment with prudence, entrepreneurs can use this tool to efficiently manage working capital. So, weather the financial storms with confidence, and let MMFs be your secret weapon for navigating the exciting, yet unpredictable, journey of entrepreneurship.

Amos Mzenge is the Manager, of Enwealth Capital Limited. Email| [email protected].

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