“The cash is not lost, it is scattered,” said Stan Markuze, CEO of Balance, a real estate treasury and cash management platform. His company says businesses that run through many legal entities may be leaving yield on the table because their money sits in too many accounts to manage by hand.
In a June 27 announcement, Balance Cash described how it happens. An organization with dozens of LLCs, subsidiaries or property-level entities ends up with cash in many places at once, an operating account here and a reserve account there. Much of it earns little or no interest. Balance says awareness is rarely the problem. Moving funds entity by entity across twenty, fifty or a hundred accounts is simply not practical.
Markuze put numbers on a typical case. “A company will have a million dollars sitting idle, but it is ten thousand here and forty thousand there across forty accounts at several different banks,” he said. “Nobody has time to log into forty portals and move it.”
The company says a single organization can hold a seven-figure idle position in aggregate. No individual balance looks big enough to act on, so none gets moved. Balance says a firm often sees the total only when it finally adds the balances up.
Why banks do not fix it
Balance argues that standard banking products fit badly. Most banks do not pay competitive interest on business balances unless the money is large and concentrated in a few accounts, and bank-based sweep features usually work inside one institution. Opening a brokerage account for each entity and shuffling funds between deposit and investment accounts is slow, the company says, and unrealistic with twenty or more bank accounts.
Its answer is an automated sweep for each entity. Each one moves cash above a target balance into liquid money market funds backed by U.S. Treasuries. The account is opened under that entity’s own tax identification number and is never pooled with other entities or other customers. Each entity keeps its own statements and tax reporting, which Balance says matters for accounting, audit and lender purposes. The funds are available the same day, and the program runs on top of the banks a firm already uses.
On safety, the company says assets sit with an independent third-party custodian. Balance is an SEC-registered investment adviser and is SOC 2 Type II certified. It notes that the investment account is not a bank deposit and is not FDIC-insured.
Who it is aimed at
Balance names three kinds of customer: real estate groups with a separate entity or special-purpose vehicle for each property, franchise operators with many locations, and holding companies with several subsidiaries. In real estate, it says, lender requirements often dictate where cash has to sit, so a sweep that works within the structure suits better than one that asks a firm to change it.
The platform also offers consolidated, real-time visibility, forecasting and transaction intelligence across entities. “Once it is automated, idle cash stops being a missed opportunity and starts being a line of financial performance,” Markuze said. He added that operators “want their cash visible and working across every entity.”
Balance says a finance team can start with a few entities and expand from there. More information is at balancecash.io.
Sources
- Idle Cash Hiding in Plain Sight: How Multi-Entity Operators Lose Yield to Cash Scattered Across Dozens of LLCs | Valuespectrum.com
- Idle Cash Hiding in Plain Sight: How Multi-Entity Operators Lose Yield to Cash Scattered Across Dozens of LLCs
