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Cash flow: How to deal with profit
 What
do I do with all this cash?
If you have managed your cash flow effectively, you
should end up with extra cash. What you do with those profits should
be directly related to your cash flow budget. Remember that you
created this budget to predict cash flow needs. There may be some
outstanding debts ballooning in the future or inventory that needs
restocking. These anticipated needs determine where and how long
you can reroute cash.
Some places to put excess cash include:
- Debt service -- Repaying
debt should help improve cash flow even further, unless the loan's
interest rate is so low you would get a better return for your
money on outside investments.
- Investments -- Check
out the pros and cons of investment opportunities such as certificates
of deposit, money market funds, sweep accounts (combined checking
and investment accounts) or interest-bearing checking accounts.
- Emergency savings --
Liquid cash accounts can help you over small hurdles and provide
ready money for unexpected opportunities.
- Capital improvements --
Putting money back into the business may be a long-term goal in
keeping with your business plan and capital budget.
- Increasing wages and dividends
-- Salary increases can help you retain your best employees,
and you may deserve a reward, too.
- Profit sharing --
A benefit and an incentive for employees
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