If your business is doing well, and you are lucky enough to be running at a cash surplus, you might be wondering what you should do with that money to maximize its potential and build a secure future for yourself.
This might sound like a good problem to have, and it can be, but money isn’t going to function on its own, it needs to be used in the right places and investment appropriately. On top of that, this shouldn’t distract you from securing further diversified means of revenue or pursuing that which you’re owed through services like commercial collections. In other words, don’t let success cause sloppy decision-making, and you’ll be able to replicate those favorable results.
Below, you will find some of the best options for those profits right now:
1. Leave it in the account
One thing you can definitely do is to leave surplus profits in the business account. It won’t earn much interest, but you will have immediate access to it should you need to buy anything for the business, so although it is not the best option from a wealth generation point of view, if your success is precarious, it might still be the best option for you.
2. Invest in stocks and shares
Many business owners are somehow not aware that they can use surplus profits, in limited companies, to invest in stocks and shares but it is perfectly possible to do so and it is often a great way of maximizing return on investment while also being more tax-efficient too. Obviously, investing any money in stocks and shares can be risky, so if you plan to do this, working with a company like M&R Capital Management which can manage your portfolio effectively for you, and only investing surplus profits you can afford to potentially lose, is sensible, but do not let that put you off because it can be a great way to bolster your financial position even further if you are careful.
3. Invest in training and development
Investing some of your surplus cash in training and development for you and your employees is pretty much guaranteed to be money well spent because the better qualified you all are, the more creative, the more productive, and the more successful you will be as a business, and that means the more likely you are to make even more money going forward too.
4. Put it in a high interest account
If you are looking for a simple solution for managing your cash surplus, then sticking it all in a high interest account or buying high interest bonds is about as safe as it gets, and it will enable you to earn more money off your profit over time. You won’t get rich overnight from doing this, but it will help you to make a little extra without having to do any additional work, which is always a welcome thing.
5. Pay dividends
Of course, you could always use the surplus to pay dividends to yourself and any other business directors in your company, so that you can ensure you are paid a decent salary for all the hard work you put into the business, in a tax-efficient way.
What to do with your company’s cash surplus is a tricky question and it is something you should consider very carefully before acting. That being said doing any of the above, with thought and care, is likely to ensure that your profits are safe and that they maybe even work for you too.
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