Be patient
It can be incredibly tempting to start using your windfall right away. If you planned ahead of time, you’re set to put the wheels in motion! But if you don’t have a plan, your windfall can quickly be reduced to a breeze. Read more about everything you need to know on planning a business budget.
These opportunities might not come along often. Take the time to outline what you would like to spend the loan on. Consider opening a separate bank account for the funds to track how they’re being used and how much of the amount you have left. This will let you stay on top of this money with no extra effort. If you need a refresher on opening up a business bank account, look no further than our overview!
Understand the tax implications
Once you have a plan for the funds, you should understand how this windfall may affect your business beyond the bank account.
Depending on where the windfall came from, it very likely will be taxed in some way. This could mean that the big amount that hit your bank account will cost you down the line. Don’t be blindsided by an unexpected tax bill. Understand how this money can affect your taxes and put a little away to account for these costs.
Pay down debts
It might be that credit card debt that you swear you’ll tend to next month or financing for a delivery vehicle, but these debts cost your business every month. Interest expenses can accumulate over the year and only come tax filing does it become clear how large the amount actually got.
It’s worth evaluating your debt and how much it’s costing you. When planning how to put your funds to work, you may find that the savings to be had on interest expenses outweigh the returns on investment elsewhere. Learn more about the benefits of reducing business debt and how to do so fast.
Invest in new assets
You may have a couple “If only” items on your wishlist for when you have more money around. Now’s the chance to take a couple off your list.
New equipment is costly and can require taking out a loan to afford it. If this windfall offers you an opportunity you otherwise wouldn’t have had, there’s the potential for efficiency gains. This can reduce operational costs in the long run providing savings from that initial purchase. Whether it’s a new computer or a renovation to a warehouse, these investments offer returns for years after purchase
Create a rainy day fund
Consider putting some money away in a savings account or similarly accessible place for it to gain interest. Cash flow management is the key to small businesses thriving long term. Smoothing out an influx of cash can keep opportunities open down the line or just keep you prepared for the unexpected.
A windfall can mean new opportunities for your business, but it’s important to balance this with future possibilities. If you manage this cash correctly, it can sustain your operations in the long run and have you ready for any obstacle.
Additional resources
Get to know cash flow
- Video: Cash Flow Statements 101 (13 minute watch time)
- What is Cash Flow? (A Simple Guide for Businesses) (16 minute read time)
- Cash Flow Statement: Explanation and Example (13 minute read time)
- Need Help With Cash Flow? Try These Tools (3 minute read time)
Learn more about budgeting
- How to Know If Your Small Business Is Financially Healthy (5 minute read time)
- Can I Afford to Hire an Employee? (5 minute read time)
- A How-To Guide for Creating a Business Budget (10 minute read time)
- Budgeting for Freelancers (When Your Income Changes All the Time) (4 minute read time)
