5 ways to manage surplus cash flow

Five ways to manage your extra cash that can help you grow your business and prepare for the future.

1. Build a cash buffer

Cash flow can be unpredictable. While you may have some extra funds now, this might not always be the case. Various factors can impact your cash flow, such as:

• Delayed payments from customers
• Unexpected maintenance or repair costs
• Rising operating expenses
• Sudden change in market conditions

It’s important to create a financial safety net by building a cash buffer.

Consider opening multiple transaction accounts so you can keep your extra cash and emergency funds separate from your everyday expenses.

2. Reduce debts

Use this opportunity to pay off existing debts, especially if they have a high interest rate. If you’re paying an interest only loan, consider switching to principal and interest repayments, or paying a principal reduction (if your agreement allows it and you can afford to). These options can allow you to pay less over the life of your loan.

3. Earn interest 

If you don’t need immediate access to your money, you could consider putting it in a business term deposit to earn interest over a fixed term. If you think you’ll need more flexible access to your cash, you can still earn interest with a business savings or notice deposit account.

4. Make upfront payments

If you pay vendors (like suppliers, manufacturers and other service providers) in instalments, explore whether you could pay in advance to negotiate a lower rate. For example, some insurance providers offer discounted rates for upfront payments compared to periodic payments.

5. Invest in your business

You can reinvest surplus funds back into your business. For example, you could use some of your extra cash to:

• Upgrade your equipment
• Expand your product line or services
• Build an online store
• Increase your marketing efforts