How to Turn Excess Cash into Business Profit Rather than letting extra profits sit in your business' bank account, consider investing them or building up working capital.

Business owners work hard to turn a profit. It's exciting when your efforts pay off and your business generates extra income, but what you do with those profits is important, too. When your business carries a surplus, that money should be working just as hard for you as you did for it.

Being smart with your profits makes it easier to do things like retain employees, attract new markets and expand your business. Whether you're looking to put it right back into your company or save it for a rainy day, excess cash should be strategically invested and saved so that it benefits you in the long run.

Here are a few ways to use those profits to your advantage.

Invest in your business.

A little extra money invested in the right places can make a big difference to your operations. Spend it within the company where it'll help you achieve your business goals. You might consider investing in your marketing and digital strategy, the development of your team through additional training and staff or the ideation of a new product or service.

However you choose to spend, do so with intent. You may want to see an increase in sales, or to improve the quality of your office culture for your employees. In any case, set key performance indicators for yourself and choose a point in time to evaluate your return on investment.

Choose investments that suit your needs.

Some businesses have a low tolerance for risk when it comes to investing their hard-earned profits. Placing your funds into a short-term GIC (Guaranteed Investment Certificate) or T-Bill (Treasury Bill) Savings Account means you can watch your money grow with a guaranteed return and no risk of loss.

For other businesses, flexibility is key. A cashable 12-month GIC like the Amplify GIC from ATB Financial lets you access your funds at any time without penalty. There's a benefit to leaving it in place for longer, though; the interest rate will rise on a monthly basis during its one-year term.

Pay down your debt.

Many businesses go into debt when they're first starting out -- especially small businesses. Statistics Canada reported in 2016 that 80 percent of start-up funding came from informal personal financing, usually in the form of "owners' savings and personal loans taken out by owners."

While debt is often an inevitable part of being a business owner, it's important to manage debt wisely. Using your profits to pay down that debt can help as long as you can balance that against the working capital you need to run day-to-day operations.

Establish cash reserves.

Building an emergency fund for your business may save you a lot of trouble down the line. If your business is seasonal or dependent on factors like weather and tourism, you'll want to have enough money banked to get by during those leaner months.

The generally accepted rule of thumb is that your business should have enough cash in reserve to make it through three to six months of average operation, as this should be enough to cover the lowest cash-inflow months of the year. However, if your reserve is too large, that extra capital will be tied up unnecessarily when it could be more effectively invested elsewhere.

Maximize capital expenditures.

Another way you many want to put excess cash to work is by acquiring further assets for your business. This might mean investing in a second office or location, purchasing new equipment or even buying out your competition. Opportunities like this can lead to better cash flow, faster growth and competitive advantage.

If you want to make improvements that will grow your business, strategic spending may be the way to go. GICs can offer you a rainy-day fund that earns interest while it sits in reserve. When choosing how to invest your spare cash, taking stock of your financial situation and goals will lead you to the right investment for your business.