Why Cash Is Still King in Business

Cash in the bank remains one of the most valuable tools a business can have. In this podcast, we explain why preserving cash is often a smart financial strategy and how using asset finance can help businesses stay flexible, manage risk, and make the most of opportunities.

Why Cash Still Matters

Having cash available gives a business options. It allows you to respond quickly when opportunities arise, such as purchasing discounted stock, taking on a new contract, or covering unexpected expenses without stress. Businesses with healthy cash reserves often have greater control and resilience.

The Risk of Tying Cash Up in Assets

While equipment and assets can be income producing, they also depreciate over time. Once cash is tied up in an asset, it becomes illiquid and harder to access if circumstances change. Even productive assets generally lose value, whereas cash remains flexible and immediately available.

The Cost Difference Is Often Smaller Than Expected

Many businesses assume paying cash is always cheaper than financing, but this is not always the case. With savings accounts earning 4 percent or more and equipment or asset finance often around 6 to 7 percent, the difference can be relatively small. In many situations, keeping cash in the bank while using finance can be a sensible trade-off.

A Simple Example

A business with $100,000 in cash may choose to use asset finance to purchase equipment instead of paying upfront. By keeping cash in the bank, the business retains flexibility for opportunities or unexpected costs, while spreading the equipment cost over time. The asset may generate income, while the cash remains available if needed.

How Asset Finance Helps Manage Cash Flow

Asset finance allows businesses to spread the cost of equipment over time rather than paying a large amount upfront. This can help maintain working capital, reduce cash-flow pressure, and support ongoing operations.

Tax Considerations

Asset finance may also offer tax advantages. In many cases, interest on finance facilities can be claimed against taxable income. Tax treatment depends on individual circumstances, and professional advice should be sought.

Key Takeaway

Cash is still king. Using finance strategically can allow businesses to preserve cash, stay flexible, and invest smarter while still accessing the assets they need to operate and grow.

FAQ: Cash vs Asset Finance in Australia

Is it better to pay cash or use asset finance?

It depends on the business’s cash flow, opportunities, and financial goals. In many cases, using finance allows businesses to preserve cash for flexibility. Suitability depends on individual circumstances.

Why do businesses keep cash instead of buying assets outright?

Cash provides liquidity and allows businesses to respond quickly to opportunities or unexpected expenses without needing to sell assets or seek urgent funding.

Do business assets lose value over time?

Yes. Most assets depreciate over time, even if they generate income. Depreciation rates vary depending on the asset type.

Can asset finance offer tax benefits?

In some cases, interest on asset finance can be claimed against taxable income. Tax treatment varies and professional tax advice should be obtained.

Does using finance reduce financial risk?

Using finance can help spread costs and preserve cash, which may reduce short-term cash-flow risk. Each situation should be assessed individually.

Is approval guaranteed through a finance broker?

No. A finance broker cannot guarantee approval. All finance facilities are subject to lender assessment, eligibility, and approval conditions.