Your idle funds should earn more than applause.

A small business owner once told me:

Another had ₹25 lakhs locked in a fixed deposit at 6%, while paying 12% interest on a working capital loan.

This is common: businesses sitting on idle cash, either because they’re not sure where to park it or because “we’ve always done it this way.”

If your business keeps surplus funds for vendor payments, payroll buffers, or seasonal cash needs, the problem isn’t having idle money—

It’s not deploying it smartly.

Let’s explore how sweep accounts, debt mutual funds, and bonds compare—and how to choose what’s right for your surplus.

Step 1: Start by Categorizing Your Surplus

Not all surplus is the same. Split your idle funds into:

• Immediate liquidity (0–7 days): salaries, bills, urgent expenses

• Short-term reserve (1–3 months): working capital buffer, emergency cushion

• Mid-term capital (3–12 months): tax payments, project-linked funds

• Parkable funds (1–3 years): longer-term unused capital

This clarity helps match your cash to the right instrument—balancing return, liquidity, and access.

Step 2: Sweep Accounts – For Operational Buffer

✅ Best for: Daily liquidity with minimal effort

✅ Returns: 3.5–4.5% (short-term FD rate)

✅ Access: Instant auto-sweep-in/sweep-out

❌ Limitations: Low post-tax returns, no long-term compounding

Use for:

• Salary disbursal accounts

• Vendor payments

• Emergency withdrawals

Think of sweep accounts as a smarter current account—safe but slow.

Step 3: Debt Mutual Funds – For Short to Mid-Term Surplus

✅ Best for: Surplus you won’t touch for 1–12 months

✅ Returns: 5.5–7.5% (depending on fund type)

✅ Access: Redeemable in 1–3 business days

❌ Needs: Basic understanding of fund types and taxation

Common categories:

• Liquid Funds: for 1–3 months

• Ultra Short-Term Funds: 3–6 months

• Low Duration Funds: 6–12 months

These funds invest in high-quality debt, giving better returns than FDs—with decent liquidity and low volatility.

Step 4: Bonds – For Long-Term Idle Cash

✅ Best for: 1–3 year capital you won’t need urgently

✅ Returns: 7–9% (depending on issuer and tenure)

✅ Stability: Predictable income

❌ Liquidity: Limited—may be locked in until maturity or tradable with difficulty

Ideal options:

• AAA-rated corporate bonds

• Tax-free government bonds

• Listed NCDs from reliable issuers

Use bonds for capital preservation with defined income, but only if your liquidity base is already covered.

Step 5: Mix and Match—Don’t Park Everything in One Place

Here’s a simple example of how an SMB with ₹50 lakhs might allocate:

Diversification gives you control over returns and access.

And it helps ensure you’re not overexposed to one risk—or one habit.

TL;DR – Too Long; Didn’t Read

• Sweep Accounts are best for weekly liquidity, but offer low returns.

• Debt Mutual Funds offer 5.5–7.5% and suit 1–12 month surplus needs.

• Corporate Bonds and NCDs are ideal for long-term idle funds with stable returns.

• Always match your instrument to your cash flow horizon, not just your risk appetite.

• Don’t let your working capital rest where it barely earns—put it to work strategically.

Your business is already earning.

Your idle cash should be, too.

With the right parking strategy, you protect liquidity, improve returns, and reduce borrowing pressure—without taking on unnecessary risk.