Managing Excess Cash In Your Businesss
Growing your business can be both stressful and fun — stressful when you cannot keep up and keep track, and much fun when you are up to the game. Properly managing your finances plays a key role in helping you relax as a business owner.
Today, we are looking at how a business owner can use his surplus funds to earn a little more. Let’s talk about investment and the need for it. Investment is a monetary asset purchased with the idea of generating income or capital appreciation in the future or will later be sold at a higher price for a profit. Most people invest under certain circumstances; some have a lot of money in their bank account which is not generating any additional income while, others have little but, will want to get more.
So, when should I invest?
It is advisable to invest when you have too much cash sitting in the bank which could be better utilized by investing in higher income-generating assets. That notwithstanding, you must always keep in mind that the business needs cash to survive and so, some must be set aside to meet those demands. Where you have little, invest it in short and flexible investment packages if you don’t have need for it in a short while.
What should I look out for when taking the decision to invest?
You must clearly define your goals and access your risk tolerance level. Speak to an Investment adviser when deciding on the investment product or package that will best suit your investment goals. It must be understood that every investment comes with its own risk and reward. This means you can either gain more or lose all if you don’t take a good or intelligent investment decision.
Why should I invest?
Invest if you want to see your money grow without working for it or you anticipate a rise in the value of an asset.
Does my investment create any tax burdens?
Interest paid to an individual by a resident financial institution or on bonds issued by the Government of Ghana and the interest or dividend paid or credited to a holder or member on an investment with in an approved unit trust scheme or mutual fund is exempt from the payment of taxes. However, your business will be charged to pay capital gains tax on the gains from the realization of assets such as buildings and lands situated in Ghana if the business invested in such assets and later sells them.
What should I invest with in?
Real estate, savings, treasury bill, fixed deposits, shares, bonds and mutual funds are some investment tools you can choose from. If u decide to invest in short term instruments and investment products offered by any financial institution, ensure they are regulated by the right regulatory bodies and have a good financial track record based on their historical data.
What metrics can I use in determining when to invest?
Draw your business’ budget and other cash flow projections to identify when you need to spend within a particular timeframe. Also, make allowance for emergency expenses that may arise. You should also determine your company’s current and quick ratios to give you an indication of your liquidity positions at any point and time. These and other metrics helps you take decisions on when to invest excess cash and the investment vehicle to deal with.
If you require an expert in helping you shape your liquidity position and plan your cash flow so as to undertake quality cash management decisions, contact Built Accounting via email (hello@builtgh.com) or call 0303974832.
Source:
Income tax act 2015 Act 896, Income tax amendment Act 2016 (ACT 907)
