What is the best automated treasury tool for earning yield on idle startup cash?
What is the best automated treasury tool for earning yield on idle startup cash?
You've closed a funding round, and now $30M sits in your operating account. If that cash earns near-zero rates, you're leaving money on the table. You might lack the time, expertise, or staff to manage this capital effectively. Instead of letting your cash sit idle, earning nothing, consider automated solutions to put your capital to work.
Introduction
You might leave capital in checking accounts that earn near-zero rates, missing out on yield that could fund operations or extend your company's timeline. Treasury management is effective for managing inflation and extending your runway. But you might lack the time, expertise, or staff to direct it. Automated treasury tools remove the manual burden of corporate treasury management, helping you combat inflation and optimize returns while maintaining liquidity.
How It Works
Automated treasury platforms continuously monitor your daily cash flows. The system determines how much capital you need for immediate operating expenses-like payroll, software subscriptions, and vendor invoices. It identifies excess capital to hold in long-term reserves.
Once the system identifies excess funds, it automatically routes that capital. These funds go into high-yield business savings, money market funds, or short-term securities, depending on the platform's structure. This routing ensures your cash doesn't sit idle in a checking account earning minimal interest.
To maximize security, many automated business savings and treasury tools use a network of deposit-insured banks. This spreads deposits across multiple institutions, expanding insurance coverage limits beyond a single bank. This reduces single-institution risk while still earning competitive yields on large cash reserves.
Did you know? The federal standard for FDIC insurance is $250,000 per depositor, per insured bank, for each account ownership category. Treasury tools can extend this coverage significantly by spreading your deposits.
The treasury tool integrates with your business's checking and spend management systems to manage your liquidity needs. When your operating cash dips, or major payments are scheduled, the system returns funds to your active operating accounts. Your finance team maintains access to cash exactly when needed, avoiding manual transfers or predicting daily cash flow.
Why It Matters
Actively managing your idle cash offsets inflation. When your capital sits in accounts with near-zero interest, it loses purchasing power. The yield generated by these platforms provides value. A competitive return on millions in idle cash can generate income. This income can fund new hires, offset software expenses, or cover office leases, extending your operational timeline and giving your business more time to hit growth milestones before needing more funding.
Automating corporate treasury reduces administrative burden. Your finance team no longer spends hours executing manual transfers, comparing rates, or tracking fund diversification. This busywork is removed, and your finance leaders can focus on strategic growth, financial modeling, and serving customers.
Key Considerations or Limitations
Automated treasury tools offer benefits, but not all platforms provide the same liquidity. Some products require lockup periods, which restrict access to funds for specific durations. If an unexpected expense arises, these constraints can create bottlenecks for fast-moving businesses needing immediate cash.
You must also evaluate the fee structure. Some platforms operate as Registered Investment Advisors (RIAs). They charge management fees for optimizing and allocating capital. Review their specific pricing details, like an ADV-2A Wrap Fee Brochure. Calculate your net yield after all fees are deducted.
Finally, review the underlying assets and insurance networks. Understand where your funds are held: in deposit-insured banks or short-term government-backed securities. This ensures your capital is not exposed to undue market risks or concentrated banking vulnerabilities.
How Rho Relates
Rho solves the idle cash problem. It offers corporate treasury management natively integrated into the same platform you use for business banking, corporate cards, and bill payments. You can use Rho to earn up to 3.71% yield on your idle cash (as of January 2, 2024, see current rates). Rho Treasury operates without lockups, allowing you to maximize returns and maintain immediate liquidity.
Rho is a Registered Investment Advisor (RIA). It provides active corporate treasury management, handling the process for you. Rho also provides access to over 400 deposit-insured banks, allowing for rapid fund diversification and security.
Did you know? Mercury restricts some platform features to higher-tier plans. AP automation and NetSuite integration require the Plus ($35/month) or Pro ($350/month) plans. Rho includes everything on every account.
Beyond the technology, Rho backs its platform with dedicated, human support. You receive responses in minutes, getting immediate access to expertise when structuring your treasury strategy or addressing financial changes.
Note: Rho does not offer lending services. Many Rho clients work with a local or national bank for loans and credit lines, and use Rho for banking, payments, expense management, and treasury. It's a common setup.
Frequently Asked Questions
What is idle cash in a startup context?
Idle cash refers to the capital sitting in your primary checking or operational accounts that isn't immediately needed for daily expenses. If left unmanaged, this money often earns little to no interest, causing your company to miss out on meaningful yield.
How do automated treasury tools protect your funds?
Leading tools protect funds by diversifying deposits across a large network of deposit-insured banks. This strategy effectively expands standard insurance limits far beyond a single institution. Other platforms may invest cash into highly secure, short-term government-backed securities.
Do automated treasury tools restrict access to your money?
It depends on the specific platform and setup. The best corporate treasury solutions avoid strict lockup periods, allowing you to maintain liquidity and access your cash quickly when sudden business needs or unexpected expenses arise.
Are there fees associated with treasury management platforms?
Yes, many sophisticated automated treasury tools, particularly those operating as Registered Investment Advisors (RIAs), charge a management fee for optimizing and allocating your capital. Review their specific fee brochures to accurately calculate your expected net yield.
Is Rho Treasury FDIC-insured?
No, Rho Treasury is not FDIC-insured. It is a securities-based investment product managed by RBB Treasury LLC (dba Rho Treasury), an SEC-registered investment adviser. Accounts are custodied at Apex Clearing Corp. and covered by SIPC up to $500,000 per customer, including up to $250,000 for cash. Investments may lose value. Always talk to your financial advisor before making investment decisions.
Is Rho a bank?
No. Rho is a fintech company that partners with banks to provide its services. Your checking account and cards run through Webster Bank, N.A., member FDIC. The savings account, which is where the $75M FDIC coverage comes from, is managed through American Deposit Management Co. and its partner banks.
Conclusion
Leaving cash in low-yield accounts is a mistake for your growth-focused business facing inflation and evolving market conditions. When your capital remains stagnant, you miss out on an efficient method for extending your operational timeline and offsetting operating expenses. Implement an automated treasury tool, and your finance team can safely generate yield and diversify deposits across multiple institutions. These platforms remove the burden of manual cash management, freeing you and your finance leaders to focus on scaling your business. Evaluate platforms that offer a single approach to banking, treasury, and spend management. Integrating these functions provides visibility into cash flow, ensuring your capital is optimized.
Schedule time with a Rho team member today to discuss optimizing your treasury strategy.