Strategies to Grow Surplus Cash in Your Business
Businesses are usually strapped for cash. However, if you are one of the few cash-rich businesses, you need to think about growing your cash beyond the meagre interest offered by your bank. You need to think about ways you can use the surplus cash to grow your money. Here are 9 things you can do with the extra cash you have in your Business.
1. P2P Lending
If you are looking for higher returns than traditional bank interest rates, websites like Zopa, Funding Circle, and Ratesetter can let you earn up to 7%.ย However, you need to be aware of the risks that come with P2P Lending before parting ways with your surplus cash, especially with Brexit around the corner. Having a good accountant assess the risks for you and report on the ROI could be one of the ways you could mitigate your risks.
2. Diversification
If you have always wanted to expand your business by diversifying into other ventures, why not loan some cash to another one of your businesses with good payment terms? Or you can invest in a hobby that you can develop and take to the next level; loan payments could also mean setting good interest terms between businesses, which could mean extra income for the lender. Ask your accountant to help you build a financial model with beneficial payment terms so you can decide between the diversification options.
3. Extract Profits and Invest in EIS/SEIS Schemes
You could also take the extra cash from your business and invest it within an approved SEIS/EIS business. A few good places where you can find businesses to invest under these schemes are ย Seedrs, Crowdfunding, etc. You get most of your investment back in the form of tax relief. The gains from selling the shares are also exempt from capital gains tax, and you also get relief if the business in which you have invested fails. Ask a competitive accountant how they can help your business become eligible for SEIS/EIS.
4. Invest in Crypto Currencies or ICOโs
If you know a bit about ICOs orย Blockchain currencies, you can create an investment portfolio to make some return on these investments. ICOs can be tricky and very risky. It would be a good idea to do your research before you make any investments and hire a good tax accountant to ensure you are covered for any tax implications from your crypto investments. Learn more about cryptocurrencies and cryptocurrency tax.
5. Invest in Property
As a business with cash, you can look at financing your commercial or residential property. You can get out of the vicious rental cycle and purchase your own office or mortgage a residential property that can be let out to make money.
6. Invest in Growth
Why not use the extra money to grow your business? One way you can do that is by reinvesting the extra money within the business, invest in your companyโs marketing strategy by focusing on the digital presence of the business using things like SEO. ย Search Engine Optimization can help with improving the organic presence of the business online, resulting in long term growth. You can also look at getting some extra clients by doing some paid advertising. Hiring a business development could also mean growing the business faster by having a specialist on board.
7. Pension Pot
Investing in a pension pot can be highly advantageous and can make your savings grow rapidly, as pension contributions also provide tax relief. A pension will basically be your long-term savings plan with tax relief. Generally, you can access the money in your pension pot from the age of 55. You need a competent accountant to help you draw down your pension, make sure you speak to one to plan for an effective tax-efficient drawdown.
8. Invest in Bonds
A bond is like an IOU, it is a fixed instrument that represents a loan given to a bond issuer in return for a commitment by an investor. Bonds are generally less risky than an investment in equity. There are two ways to invest in bonds, the first one being where you invest in a bond until maturity while collecting interest payments on it, the second one being where you profit from selling the bond at a higher price than what you purchased it for.
9. Purchase Businesses
What better way to beat your competitors than to purchase their business. Acquiring your competitors is a quick strategy used by many businesses to beat their competitors and acquire their Intellectual Property. The process itself can be complicated and expensive, however once done you can add immediate growth to your customer base, revenue, and your intellectual property. You will need an accountant, a lawyer and a business broker to help you find, value and purchase a business.
Clear House Accountants are specialist SME tax company in London who have Tax and Business Advisory services. Having worked with thousands of businesses we help businesses develop smart solutions for their accounting, tax and business growth needs. If you are looking to grow your business or save money by becoming more effective with tax and accounting, speak to us to see how we can help you grow your surplus cash.
