If an unplanned $10,000 comes in, it’s like opportunity knocking with a brass knuckles on the door for a growing Orem business owner. It can be a tough financial choice, as well. If so, should it be used for essential costs? Should it be retained in reserve safely? Should it be funding an initiative that can make money in the future? It will vary based on cash flow, business obligations, and the reason for the business. Utah business resources highlight the need to find out what cash-flow requirements are and to keep the necessary cash reserve in place before investing capital.
Is there a problem that the money will solve?
The $10,000 may be a sensible expenditure as it fulfills an urgent business requirement. Not being able to replace critical equipment can disrupt operations. Supplier relationships can be safeguarded by making payments on bills that are essential. Systems investments can also eliminate repetitive work and enhance efficiency. The lesson is to identify what’s a good buy from what’s just a pretty buy. The SBA advises to use financial statements and cost benefit analysis for decision making of a business. An orem accountant can assist an owner in understanding the financial impacts prior to investing the money.
Save When Stability Needs More Attention
When income is variable or future liabilities are in doubt, it might be better to save. Having cash reserves can be useful in managing a period of reduced sales, a costly repair or a slow-paying customer, without having to take on more debt. Determining the amount of months’ operating expenses to include as a financial cushion depends on the business, but many businesses think of several months’ worth of operating expenses. Uneven cash flow and operating costs are also important financial issues for small businesses, as revealed in recent Federal Reserve survey data.
Investing when the return can be measured
The business is more attractive to invest in if it has a reliable cash flow and a clear growth opportunity. This could be in the form of new equipment, training for employees, new technology, or new marketing. The question is not: Is the investment promising? The issue becomes how much is the expected financial gain worth of the cash flowing out of the business? When the revenue can be expected to be consistent, and the business is cash-flow positive, the question of reinvestment should be considered, SCORE suggests. A cash-flow statement also may reveal if the company will be able to handle the investment during its normal operation.
Make the $10,000 Decision With a Plan
The answer is not universal as to whether to spend, save or invest $10,000. The first thing an Orem business owner needs to do is to safeguard any must-haves and keep a healthy cash flow. The rest of the money can then be funneled into opportunities that have measurable returns. Checking cash-flow projections, future expenditures, debt obligations and returns can help make the decision much more objective. The state of Utah has some financial and counseling resources available for businesses through state agencies and the Small Business Development Center. After all, the best choice is the one that’s going to help both the here and now and the future.
