Positive cash flow indicates your business’ liquid assets are growing, giving you increased financial flexibility. Here are 5 ways to manage extra cash when you have it, to help boost your business and prepare for the future.
Build a cash buffer
Cash flow can be unpredictable and while you may have some extra funds now, it’s possible you’ll be waiting on several unpaid invoices down the track. It’s important to create a financial safety net by building a cash buffer for those times. Consider opening a new account to hold extra funds you can access when you need it. It could also be beneficial to open a savings account for your business, as you might be able to earn interest.
Use this opportunity to pay off existing debts, especially if they have a high interest rate. If you’re paying an interest only loan, consider switching to principal and interest repayments, or paying a principal reduction (if your agreement allows it and you can afford to). These options can allow you to pay less over the life of your loan.
Improve your business
Could your work tools do with an upgrade? Or is it time to invest in building an online store? Another possible way to spend surplus cash is by making improvements to your business. Research what your competitors are doing or speak to your customers to see how you could up your game.
Make upfront payments
If you pay vendors (like suppliers, manufacturers and other service providers) in instalments, explore whether you could pay in advance to negotiate a lower rate. For example, some insurance providers offer discounted rates for upfront payments compared to periodic payments.
Reward your team
It might be time to reward your staff for their hard work. Even a small gift can show your team they’re appreciated and help boost morale. And remember, you’re part of the team too.
Having surplus cash flow can be great for your business, but it’s essential you manage it well to safeguard against future financial challenges. To get advice or support with managing your cash flow, speak to an accountant or business adviser about your finances.