4 Smart Strategies for Managing Surplus Cash in Your Company

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As a small business owner, you likely spend more time worrying about making a profit than managing surplus cash. However, once your company finds its footing, you may end up with a surplus on your hands.

Surplus cash, best described as excess money beyond what’s required to run your business, is a pleasant problem to have. However, it can also lead to one crucial question – what should you do with that money?

Surplus cash can potentially reduce your company's value over time and become wasted money tied up in your company with limited options for relief without tax penalties. So, you’ll want to put any surplus to good use as quickly as possible. Here are some effective strategies for managing surplus cash in your company:

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How To Manage Surplus Cash In Your Company

Step 1: Opt for Reinvestment

Reinvesting surplus cash back into your company is a great way to benefit and often provides surprising tax gains. For instance, you may be able to claim capital allowances or tax relief on new equipment bought with excess money. Equally, you could invest in recruitment that will turn surplus cash into major returns or research & development (R&D) focuses like market research to enhance usefully profitable business areas, like product development. 

Step 2: Increase Your Pension Payments

Pension payments offer one of the most tax-efficient ways to extract money from your business, making them great for surplus cash. For example, pension payments are an allowable business expense in most countries if you own a limited company. These payments can also help to offset your corporation tax bill. And, of course, putting money in your pension now means saving for your future, even if it does technically take money out of your business. 

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Step 3: Diversify Through Investments

Stock market shares might not be the best option if you want to invest surplus cash without excessive risk. However, making informed investments with a trusted investment firm can yield significant returns on what is essentially additional money. REIT index and small-cap funds can be attractive long-term options with potential high returns. Simply seek investment advice from a firm with GIPS performance certification to prove they’re trustworthy, transparent, and have an impressive portfolio. This way, you can enjoy diversified investments that grow alongside your company.

Step 4: Make it a Gift

Gifting surplus cash to a charity can be an excellent way to give back while fulfilling your corporate social responsibility (CSR). Corporate charitable gifts can also provide certain tax deductions. For instance, if you’re a registered C-corp, donations are tax-deductible, especially if you itemize your deductions. Charitable gifts can also significantly boost public perception of your brand, with 45% of customers more likely to buy from a brand that donates to charity.

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Takeaway

Don’t stress over surplus cash in your company – put it to good use with these lucrative options. Whether reinvesting in your business, increasing pension payments, diversifying through investments, or making charitable gifts, you can ensure that your surplus cash contributes to the growth and positive impact of your business.

Have you done any of these options for your company? Let us know in the comments!

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