Do I Have Surplus Cash?
Is your business in the enviable position of having surplus cash? You’d be surprised how many business owners have no idea whether they have a little extra cash in the bank to play with.
If you have more cash in the business than you need for day-to-day operations, then congratulations my friend – you have surplus cash! But don’t go wild just yet. It’s important to spend this excess cash wisely, and really make it work hard for your business.
What can I do with surplus cash?
There are numerous ways you can spend surplus cash in your business.
Here are some examples of how you might use it:
- Hire more employees – another pair of hands can bring more capital into the business in the long run, so growing your team could be a worthy investment
- Move to a bigger office – could you do with a bit more space? Want to set up shop in a different area? If you have spare cash, now could be the time to make that move
- Reinvest in equipment – is it time to give those old laptops an upgrade?
- Pay it out in dividends – our Can I Pay Myself? article should help here
- Invest – stocks, shares, bonds, crypto currencies or property, the choice is yours!
- Increase your marketing budget – grow your business by spending more on marketing channels like PPC, display advertising or social media ads
- Diversify your business – are there other ventures you’d like to invest money in? If the pandemic taught business owners anything, it’s that having a back up plan always helps
- Add to your pension pot – pension contributions can also provide tax relief
- Donate to charity – good karma bonus!
And the final option? Leave the cash in your business. Think of it as a cash buffer that’s going to be there when you need it.
Remember, you do need to leave some cash in your business for things like VAT, Corporation Tax, GST and PAYE and you could also be earning interest on the amount. So we recommend you speak to a good accountant, who will be able to advise you on all of your options.
This all sounds very exciting doesn’t it? But the question is – how do you know you have surplus cash in your business?
How to spot when you have surplus cash
Staying on top of your business incomings and outgoings will give you a clear view of your cash position and help you identify any surplus cash. A cash flow forecast can give you a picture of your current and future cash position.
Cash in your business is never static, it flows in and out at different times, so having a cash flow forecasting tool like Float which syncs up with your accounting software (our software works with Xero, Quickbooks or FreeAgent) is a powerful way to access accurate, always up to date information on your business’s cash. Seeing a cash surplus before it happens can help you make considered, proactive decisions about how to spend the cash sensibly.
And the best bit? Even if you’re not currently on track for a cash surplus, you can use Float’s scenario planning feature to work out the impact different business decisions will have on your bottom line. In essence you could work towards making a cash surplus happen, because you can plan the steps you need to take to get there. Want to move to a new office in 6 months? Start making plans now to get more cash in or cut some of your outgoing to make it happen.
Understanding if and when you’ll have a cash surplus can do wonders for your business growth. Start cash flow forecasting today with our free 14 day trial and bring those big dreams into the real world.