How to manage your company's cash

Cash is king  -  Liquidity is opportunity  -  Capital is security

But often when cash comes your way or you start to build up surplus reserves, you may also find that money isn’t everything, and instead of having sleepless nights worrying about the overdraft, you have a different set of challenges to contend with:

• Is my money safe from grabbing hands?
• Can I avoid publishing my cash position online and attracting unwanted attention?
• Will it all get taken off me by the tax man when I die?
• How do I invest it to get sensible returns?
• How do I access it to do the things I’ve always wanted to do, without paying a pile of tax?
• Should I focus on debt reduction or investing for growth?
• How do I prioritise the different options for spending or investing?

The list goes on, but broadly comes under 3 headings:  how can I best Safeguard, Manage and Invest my cash reserves?

By the way, we are running a series of two events over the next few weeks on this very subject, but in the meantime here are our initial thoughts – more to come later!

Safeguarding cash

If you have generated cash from trading, the worst thing you can do is leave it in your trading company, where it is exposed to litigation risk.  However, it also doesn’t seem a great idea to extract it personally, pay potentially large amounts of personal tax, and have it exposed in your personal estate for inheritance tax (IHT) purposes.

Even surplus cash within a company can be exposed to IHT in certain circumstances.  So, what are the options?  There are various solutions, but not enough space to go into these here….more on this in our next event.

Managing cash

Managing cash reserves ongoing is really about making sure it’s in the right place at the right time – and not in the wrong place at the wrong time.  

Aspects such as audits, publishing full accounts at Companies House, credit ratings all play a part in how cash is managed within your company.  You need to be able to demonstrate secure and stable financial performance, and striking the right balance with your cash position is a key part of this.

You may need to think about strategies to minimise public exposure, and it all needs careful planning with your accountant to achieve this.  More on these strategies in our next event.

Investing cash

Should you invest in the current trade?  Should you focus on acquisition, R&D, property, debt reduction?  These questions are not easy to answer but the thing to focus on is Return on Investment (ROI) – if opportunities can be gauged unemotionally in relation to this, that allows you to sort your shopping list into order.  In our event, we will be talking more about building a framework and approach for this.

Clearly, this is not everything that could be said but hopefully helps as an initial steer on this important subject.  We will be developing our thoughts on this further over the coming weeks and hope you will join us for our two-part virtual event the first being on Tuesday 14^th December at 1 pm.

Please note: This article is provided for information only and was correct as at time of writing (19/11/21). Any lists and details provided above are not exhaustive and are not intended to be full and complete guidance.  No action should be taken without consulting detailed legislation or seeking independent professional advice. Therefore no responsibility for loss occasioned by any person acting or refraining from action as a result of the material contained in this article can be accepted.