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Strategies for Smarter Cash Investment Determine what your business will need next quarter and uncover new cash sources.

By Randy B. Hecht

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Do your business plan and cash flow forecasts account for untapped or hidden sources of cash? While revenue generates most of your money, you may be overlooking additional resources that can support your operations and reduce cash-flow pressures. As you look ahead to the coming quarter and year, several strategies may help support your business with an infusion of cash that you've overlooked.

"Hidden cash can include everything from getting money back in a credit card rewards program to taking advantage of new industry-specific R&D tax credits from the IRS," says Brian Moran, founder of business consulting firms Small Business Edge and Brian Moran & Associates.

Reaping (Cash) Rewards

A quick review will tell you how much you earned in cash-back rewards during the past calendar year. Could your business make more strategic use of its credit cards? Consider exploring ways to use your cards responsibly yet still generate rewards that could contribute to your operations and improve your cash flow.

For a company with a high volume of credit card activity, those rewards can be substantial. "We make good use of our rewards credit cards as a way to generate new cash flow," says Kyle Taylor, founder of the personal finance blog The Penny Hoarder. "We place as many business expenses as possible on a cash back card, which is especially powerful if you have large recurring expenses. This simple action helps us generate about $30,000 annually for very little work."

Research Development Credits

As for those tax credits: The IRS notes in the Small Business/Self-Employed section of its website that research and development expenditures "are generally capital expenses. However, you can choose to deduct these expenditures as current business expenses." Ask your accountant or a tax professional to look into whether your company's research and development activities qualify.

Outgrown It? Unload It

In addition to locating these "hidden" resources, business owners can add to their cash assets by eliminating expenses that are consuming cash without delivering a valuable return. "Look at what you spent your money on in the past year and ask yourself, do I need this going forward? If not, cancel it," says management consultant Denise O'Berry, author of Small Business Cash Flow: Strategies for Making Your Business a Financial Success. The review is especially important now that so many subscription services renew automatically, she notes. You may be paying for services that are not only outmoded, but also forgotten. Updating those expenses in line with current needs can free up funds to be reallocated more productively and profitably.

Update Systems to Upgrade Cash Assets

O'Berry also advocates looking for cost savings in your systems and processes, especially if you complete many of them manually or keep track of them in your head. She recommends creating a written document (whether a list on paper or a record in a computerized flow-chart) that outlines the steps involved in completing specific tasks. That will allow you to assess how much time and/or money you're wasting on those activities and give you a basis for evaluating tools that can automate the process and increase your operating efficiency. "Most of the time, people look for a tool and then they try to force-fit what they do into that tool," O'Berry says. "And that can end up costing you money in the long run."

On the other hand, finding the right tool can generate recurring cash, an exciting prospect, even if the thought of business process review doesn't thrill you. "This kind of found money is not as sexy as sales or marketing," adds O'Berry. "But it can lead to some really great savings just from the efficiency perspective. Business owners have a tendency not to focus on that kind of stuff, but it can save you a ton of money over time." With technology advancing so quickly, new opportunities for increased efficiency and reduced costs emerge constantly, so it's worthwhile to repeat the exercise annually.

Reinvest That Recovered Cash

Once you have lured cash out of hiding or freed it from needless expenses and inefficient procedures, it's time to make the most of it. Moran recommends using found money to create an emergency fund if your company has yet to establish one. Beyond that, he suggests designating found money for a specific purpose, such as paying for big purchases, rather than putting it toward general expenses. "The goal for this money is to balance the cash flow level in your business," he says.

By taking a strategic approach to maximizing your company's cash assets, you create additional resources that you can use to fuel upcoming plans and invest in the long-term growth of your business.

Find more articles from this series here.

Randy B. Hecht covers finance, management and expansion topics, including cross-border commerce, to help small businesses optimize their long-term performance and market potential.

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