Cash Sweeps is a financial model where it the excess cash flow is used to maximize interests on earnings and to pay off the outstanding debts instead of having it distributed to shareholders. It functions as an automatic tool that can be used automatically to transfer payment of debt or to invest the offerings of higher interests. Cash sweep is thus an effective management tool that enables having a proper and successful financial planning. Such a planning focuses on an adequate management of debt and making of proper investments for both businesses and individuals. Making proper investments and managing debt well are topics that have been covered in the Bible. The Bible supports financial modeling of Cash Sweeps as through the support of its benefits of proper debt management and proper investing.
Cash sweeps was identified as a management tool where excess cash flows are automatically transferred to make specific payments such as debt and investments. Debts can impact the balance sheet of a company and this makes it highly critical for a company to pay-off its debts and ensure that it has a healthy business. The use of cash sweeps enables the company to pay off its outstanding debt before its due date. It can help a company to minimize is liability and risks and to also pay its debts faster. Cash sweeps can thus be set up by a business by setting a minimum balance for its primary checking account. Any amount that is above the minimum can thus be sent automatically to loan repayment in case a debt sweep has been set up.
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Cash sweeps enables with the management of debt and the Bible has a lot to state regarding proper debt management. Psalm 37:21 (New International Version) states that "The wicked borrows and does not pay back, But the righteous is gracious and gives." This is a clear indication that one’s attitude with the management of debt is an indicator of the attitude. A wicked person is thus careless, selfish, and irresponsible when managing debt. They are not concerned whether debt is paid back but are usually more concerned about their pleasure and gain. However, the righteous views debt as something that is not desirable but as something that should be avoided. In case of debt, the righteous approaches the debt with a calculated measure and identifies the ways that the debt can be wisely handled. Christians have thus been observed to make use of less debt financing unless when necessary (Cai & Shi, 2017). The use of cash sweeps presents a financial model that can be used to handle such debts effectively. It enables one to become a steward and responsible with their debt by focusing on strategies that should minimize the debt as much as possible.
When dealing with debt the Bible observes how the borrow can become a slave to the lender. Proverbs 22:7 (New International Version) states that "The rich rule over the poor, and the borrower is slave to the lender." This indicates that borrowers are always at the mercy of the lender. This is an indicator that one should always avoid debt as much as possible or else they will become the lender’s slave (Howell, 2019). When someone is in debt, they will get into financial ruin or bankruptcy and will not be able to save that money and give. Responsible debt would thus involve trying to minimize the amount of debt as much as possible. Cash sweeps is a strategy which strives to reduce one’s debt and to manage the debt as effective as possible.
The other benefit of cash sweeps is that it can be used to help one to make proper investments. Automated cash sweeps can function as an automated cash management system that is used for short-term investments. The sweep account thus functions by automatically transferring the amounts that exceed or fall short a given level when there are higher interest-earning investment options available at the close of the business day (Baby, 2018). Such a financial model can be used to realize several advantages such as saving the account owner time and the trouble of making separate daily decisions regarding where to direct their cash flow.
Cash sweeps are also advantageous in that it allows businesses or an individual to ensure that the extra money does not remain idle at the low-interest account. Instead, the excess money can be put in a better liquid cash investment which can then be used to earn a higher interest rate. This can then be used to realize liquidity and high interests. The investments that are made by Sweep accounts could be in different businesses such as the money market mutual funds, short-term certifications, and savings accounts.
The advantage of the use of cash sweeps to make investments is seen in the Bible through the parable of the talents. The parable of the talents is in Matthew 25:14–30 and the story involves a master that left the house to travel and entrusted his property to his three servants. The first servant received five talents, the second one received two talents, and the third servant received only one talent. Upon returning, the master found that the first and second servant had put their talent to work and doubled the value. However, the third servant kept his talents. In Mathew 25:27 (New International Version), it states that “Well then, you should have put my money on deposit with the bankers, so that when I returned I would have received it back with interest.” This shows that the master expected that the servant put the money into use so that the master would have received interest.
The parable of the talents shows that everyone is expected to make proper investments with the financial outlay which they have access to. The good steward is the servant that increased the value of their talents both in the literal and monetary sense. The bad steward can be observed to be individuals that failed to grow their talents as a result of mistrust of fear (Saunders, 2016). The use of cash sweeps functions as a model that can be used to assist one in making their investment. Just like in the parable of the talents, the good servant is the one that was entrusted with talents and used it to increase value, cash sweeps similarly enable one to increase the value of the money that one is entrusted with. It ensures that one does not leave their money in their accounts just like the bad steward who did not make good use of their talents.
The use of financial modeling such as a cash sweeps can facilitate the easy making of financial decisions. Such an automation of financial decisions can be used to make one be at peace even with their financial undertakings. The Bible observes that having such a peace should rule the hearts of believers. Making financial decisions can be especially challenging and it can make someone to lack peace as they agonize over different decisions. Having a good financial plan will help one to be at peace with the decisions that they make. Proverbs 10:22 (New International Version) further states that "The blessing of the LORD brings wealth, without painful toil for it". This refers to the fact that the blessings that God brings do not come with so much struggle but come with a significant element of peace.
Financial modeling through the use of cash sweeps enables one to keeps one finances current and this can be used to avoid wastage. The Bible specifically addresses the issue by focusing disapproving on behaviors such as glutton. Christians are thus tasked with properly managing their finances on a current basis and making no room for desires that can jeopardize their spending. Additionally, one should consider taking debt when it is necessary. Christians may thus be tasked with the ability to distinguish between their wants, needs, and desires for every of their transactions. Having a proper financial plan such as that through the cash sweeps enables one to make financial investments and to avoid any indulgence on matters that are necessary. A proper plan can thus be beneficial to assist one to stick to the basic necessities and avoid luxuries.
In conclusion, financial modeling through the use of cash sweeps was found to be advantageous in debt management and facilitating investments. The Bible also states that the righteous manage their debts effectively while the wicked are irresponsible with their debts. Additionally, the individual that does not manage their debts effectively can be regarded as a slave to their lender. Cash sweeps were found to facilitate such as proper management of one’s debt. The Bible further observes through the parable of the talents that God expects everyone to make financial investments that have good returns. Having a proper plan through automated cash sweeps can facilitate such investments and ensure that excess income does not lie idle at one’s account. Proper planning can further facilitate easy decision-making that creates peace and avoids wastage of one’s income.
References
Baby, G. (2018). A primer on cash management. Journal of Securities Operations & Custody , 10 (4), 366-372.
Cai, J., & Shi, G. (2017). Do religious norms influence corporate debt financing? Journal of Business Ethics , 1-24.
Howell, E. (2019). Payday lending and the case of Proverbs 22: 7: Wisdom for the borrower and warning to the lender. Review & Expositor , 116 (1), 33-37.
Saunders, K. T. (2016). Is there a difference between investing and gambling? A Christian perspective. Journal of Biblical Integration in Business , 19 , 57-71.
