It’s not that they’re necessarily strapped for cash, it’s that they don’t have a reason to spend it. That’s the conclusion of a recent report by the Association for Financial Processionals Corporate Cash Indicators (AFP CCI), the results of which were revealed Tuesday (April 27). While the research shows that businesses do expect to decrease cash holdings in the incoming quarter – the third consecutive quarter businesses plan to do so – businesses seem to be cautious with their spending and investing.
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According to the AFP, the April 2015 quarterly CCI results – underwritten by Capital One – reveal optimistic findings regarding the current business environment. “As the CCI suggests, we see clients continuing to exhibit an interest in spending cash when the opportunity presents itself,” said Senior Vice President for Capital One Bank’s Treasury Management Group Pasquale Nuzzo. “That eagerness is tempered, however, by some of today’s economic realities, and market uncertainty may continue to affect companies’ cash use in the near future.”
This year’s second quarter did show an increased willingness among businesses to offload cash compared with the first quarter of 2015. Researchers attributed this trend to the strengthening U.S. dollar and the first quarter’s endurance of a particularly punishing winter.
The AFP inquires about spending plans among companies each quarter by collecting information from employees that have a full scope of their business’ cash flow and liquidity needs, the group said. Corporate plans to grow or shrink their cash offer insight into business outlooks, the AFP said.
In short, according to AFP President and CEO Jim Kaitz, treasury professionals are signaling a greater willingness to spend, but they need either an economic or a monetary trigger to do so.
The AFP’s survey includes a slew of businesses of various sizes, so it is unclear exactly how these results apply to the nation’s SMEs. Recent research has revealed that mainstream banks are actually relaxing their lending restrictions on small business borrowers, however.
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