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Running a business involves more than simply generating high monthly revenue. As a business owner, you know firsthand that cash flow management is absolutely critical. Instead of leaving your company’s reserve funds idle in a low-yielding account, you can optimize them by transferring them into a time deposit.
However, what exactly makes this investment instrument so crucial to a company’s financial stability? Let us examine this further.
Simply put, a time deposit is a savings product where funds are locked for a specific period and can only be withdrawn upon maturity. Unlike a regular savings account, which you can access at any time via an ATM, a time deposit locks your funds away for an agreed-upon term, with options of 1, 3, 6, or 12 months.
For corporations, time deposits function as a secure safe-haven asset. This is an ideal instrument for holding emergency funds or capital for future expansion with very low risk.
However, this instrument yields more competitive interest rates relative to regular savings accounts.
Also Read: Opening an e-Deposit is Now Easier and More Affordable via myBCA Bisnis
Among the many types of investment instruments available, time deposits remain one of the most popular. Financial managers frequently select this investment vehicle for several compelling reasons, including:
The primary consideration is security. The funds you maintain in a time deposit are relatively safe, as they are guaranteed by the LPS (Indonesia Deposit Insurance Corporation) in accordance with applicable regulations. Therefore, you can have peace of mind regarding the security of your money.
Another compelling feature of this investment instrument is its guaranteed returns. This stability occurs because deposit interest rates are locked in based on the initial agreement. The longer the term, the more interest you’ll earn. Consequently, you can reflect profits more accurately in your financial statements.
Because funds in a time deposit are 'locked up,' the company avoids the temptation to use its cash reserves for non-urgent expenses. This indirectly helps stabilize the business’s cash flow.
Naturally, no instrument is completely flawless. Crucially, time deposits offer limited liquidity. This means that if the company suddenly needs funds before the due date, it will be charged a penalty fee.
This is because you withdrew the funds before the end of the term. In addition, interest earned on deposits is subject to applicable income tax (PPh). This is already covered by tax regulations.
Also Read: Understanding Business Capital Types for Long Term Sustainability
Accurately calculating net interest is essential for effective corporate budget planning when allocating funds to time deposits. Here is a simple formula commonly used:
Deposit Interest = (Deposit Amount × Annual Interest Rate × Term ÷ 12 Months) – Tax
Note: Interest income tax on savings balances exceeding Rp7,500,000 is typically 20%.
Case study:
A company invested a total of Rp500,000,000. The interest rate is 3% p.a. for a 6-month term. Based on this, calculate the net interest earned:
Gross interest: (Rp500.000.000 x 3% x 6 : 12) = Rp7.500.000
Tax deduction: Rp7.500.000 x 20% =1.500.000
Net interest: Rp7.500.000 - Rp1.500.000 = Rp6.000.000
Consequently, over a six-month period, the company gained an additional Rp6,000,000 in working capital simply by maintaining its funds in a secure account.
Also Read: Cash Flow Statement: Definition, Benefits and Preparation Guide
Choosing the right bank is key to effective corporate financial management. Ocean by BCA Time Deposits deliver flexibility and security for your business in one single solution.
With a wide range of currency options and terms tailored to your business needs, Ocean by BCA makes it easy to ensure your company’s assets continue to appreciate. In addition, time deposit interest can be automatically transferred to your preferred account every month, ensuring consistent liquidity.
Put your idle company funds to work. Optimize your business capital with our trusted banking services. Learn more about the other benefits of time deposits on Ocean by BCA here.
