4 Smart Ways To Reinvest Extra Cash Into Your Business
If your business is experiencing a boost in sales right now, you're likely assessing several options on what to do with that extra cash, which is brilliant.
"But just because the coffers are overflowing does not mean that you should make any rash decisions," cautions a blog by CFOHub. "Rather, this is an opportunity to drive optimizations and build systems within your business."
What great news to have such a windfall. Examining how to allocate the extra cash will prove invaluable for the effective financial management of your business.
Coincidentally your timing aligns with April’s Financial Literacy Month, first designated in 2004 by a Senate bill, then a 2005 House bill that asked President Bush to announce the declaration.
Financial literacy involves several components for businesses and individuals alike, including learning how to spend, save, invest, borrow, and protect finances.
What About Creating A Cash Buffer?
Setting aside some of the extra cash for emergencies is a good option, particularly given statistics that indicate running out of money can be a critical factor in a business failing.
However, some finance experts consider the extra cash a fantastic opportunity to reinvest in your business. "Although a cash cushion is critical, you should always invest as much cash as possible back into your business,” advises a QuickBooks blog.
Identify where a reinvestment of funds could further your objectives, whether toward creating and launching a new product, expanding marketing efforts, or buying new equipment or services.
"Ultimately, any investment you make in your business should potentially improve cash flow down the road,” according to the QuickBooks post.
Look for places to put your extra money that will earn your business more now or in the future or a reinvestment toward something that will save you money and time.
Here are four ideas to reinvest your extra funds to improve operations and processes, boost revenues, and fuel growth.
Consider using the excess cash for capital expenditures, such as purchasing equipment, buildings, or property, including vehicles.
Depending on your situation and business plan, this might be an excellent opportunity to buy real estate for expansion.
In addition to setting the stage for future growth, using extra cash for capital purchases could increase your business deductions for your business at tax time.
Stock Up on Inventory.
This is a viable option if you have the space and can get good prices on the inventory.
Extra cash could help your business buy in bulk and getting the inventory at lower prices will set you up for larger margins.
However, stocking up on inventory with that extra cash is likely a poor choice for companies that sell goods that go out of style quickly, are seasonal, or are at risk of theft, notes economist and consultant Bill Conerly in a Forbes post.
It's a smart move, though, for a company, for example, that distributes nuts and bolts. The fasteners will eventually sell, and you get protection against supply disruptions, Conerly adds.
Add/Expand Technology and Services.
Where you put this reinvestment will depend on your specific business, objectives and needs. Options range from purchasing new computers to expanding hardware, software technology, or services.
For example, you could get reliable and faster internet so your business can experience maximum uptime, minimal delays, and easier cloud access.
High-speed and reliable connectivity can lead to improved efficiencies, productivity and customer satisfaction, which translates into increased sales and revenues for your business. If available, use the extra cash to get business fiber internet service.
Reinvest in People.
Reinvesting in people might mean spending extra money on your leadership or personal skills. Or toward employee development and training or building an attractive work culture.
Look for ways to funnel that extra cash into talent — that's always a smart move.
If you hire your first employee or add staff, identify where you need the most help and bring someone on board who could make the most significant difference in your company’s growth or future.