U.S. Companies Have $1.73 Trillion: The Smart Way to Invest

June 4, 2015 Hailey Yook

Companies have more cash than ever before.

At the end of 2014, U.S. non-financial companies held a record $1.73 trillion in cash. A recent article in Forbes discusses a new analysis by Moody’s Investors Service that found cash piles have grown 4% from $1.67 trillion in 2013.

As these cash piles continue to grow, nearly two-thirds of it is sent abroad. It’s a convenient way for companies to earn some returns, away from U.S. tax collectors. In fact, Microsoft, Cisco, and Oracle have 90% or more of their money abroad.

But no matter how convenient it is, the investment of leaving their money in a far-away bank somewhere earns mere paltry returns. What if companies used their excess money on a risk-free, high-yield investment, such as dynamic discounting?

Invoices need to be paid regardless, so it’s just a matter of paying them a bit earlier, and not to mention, paying less! Companies can charge suppliers anywhere from 2–24% APR for these early payments, so they’d make bigger gains than if they were to just let their money sit idly in a bank where it often earns less than 1% interest.

It’s clear that U.S. companies are looking for ways to put their money to use. Capital spending, dividends, and stock buybacks have reached record highs. Acquisition spending has surged 20% to a whopping $322 billion—an indicator of what the article refers to as “a corporate shopping spree.”

Imagine if companies made the smart decision to invest in high-return programs like dynamic discounting, instead of blowing their money on “shopping sprees.” They would both pocket bigger profits and help build a stronger supply chain, which have great benefits on the economy as a whole. According to Forbes, under all of this cash is a rapidly improving economy, as revenue has climbed to $11.8 trillion, up from $11.2 trillion in 2013.

A stronger supply chain, a thriving economy, and even more profits? It’s a win-win all around. Cash-rich companies should see that the investment opportunity with the lowest risk and the highest return is sitting right in front of them—the supply chain!

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