Strategically planning the use of surplus cash fosters disciplined cash management, leading to reinvestment in the business, debt reduction, or distribution to owners.
Primary Implication
Not enough business owners get to wrestle with the best decision in business—what to do with the cash surplus of my business? Those who get to wrestle with this decision are disciplined in both their cash and profit management. They make their assets work hard for them, and as a result, they earn a cash surplus.
Those that don’t have this opportunity to decide what to do with a cash surplus are the same business owners who wonder why they never have any money? Don’t be this person. Manage your profits and cash through the BusinessCPR™ Management System.
Overview
Knowing what you want to do with a cash surplus your business generates is the beginning of being more disciplined in how you manage your business cash flow from profits. Those who know what they want to do with their cash are 100% more likely to practice disciplined cash management over their cash inflows and outflows. They use a multi-week rolling cash flow forecast to protect their business from cash outflow surprises often arising from cash inflow setbacks.
The three universal surplus cash flow strategies show the benefits of disciplined cash and profit management:
- Convert your surplus cash into new assets to increase sales and profits.
- Use your surplus cash to reduce liabilities to lower your cash outflow pressure.
- Transfer your surplus cash to the owners for personal use.
None of these cash surplus strategy options exist until your business makes a sale that is delivered and collected at a profit. Put another way, every dollar of cash not collected or wasted is a dollar less to invest in your business, yourself, or to pay down your debt.
