Cash Reserve

• Businesses utilizing compound interest to grow a general cash reserve may need this money to pay for regular business expenses. Some companies, like insurance companies, require a general account or cash reserve as a legal requirement to pay for claims on insurance contracts. The compound interest reduces the need to collect additional premium from policyholders. For other businesses, it reduces the need to earn money from normal business activities.
  
  

Investment Account

• Some companies require the use of an investment account for retirement purposes. This account is normally part of a pension. The pension makes payments to employees when they retire. This account is a trust account, separate from company expenses. The pension is sometimes invested in fixed insurance contracts that pay a guaranteed rate of return. This guaranteed return on investments ensures that pensions are paid on time and payments are of the amount promised to pensioners.
  
  

Alternative Profit Sources

• Compound interest may serve as a source of profits for the company. Companies that invest in real estate, called real estate investment trusts, exist solely to earn profits for shareholders through investments. These investments compound if the dividends (the share of profits paid) are reinvested into the company. Investors may find this particularly attractive as an investment.
  
  

Payroll Financing

• Some companies use compound interest to build a pool of funds used in lieu of payroll financing. Payroll financing is the process of borrowing money to pay for payroll. These loans are often short-term, lasting just a few days. The impact of interest over the long term, however, may be significant for a company. Companies wishing to eliminate outside funding to meet payroll deadlines may establish a cash account used specifically for this purpose.