Years ago, we had a client with a thriving business turning over £5 million a year.
His secret?
The business was also sitting on another £5 million in cash reserves.
Now, if you’ve been reading my recent emails, you’ll know that’s not necessarily a good thing. The client didn’t want to take the money out — he didn’t want the tax bill. But if it was going to stay in the business, it should have been working for the business: fuelling growth, or at the very least, earning a decent return.
Instead, it was just sitting there. Doing nothing.
But that wasn’t the biggest risk.
Because there was so much cash, the business was in danger of being reclassified by HMRC as an investment company. And that would have carried some serious tax consequences.
At the time, HMRC hadn’t yet caught on.
But we were pretty sure it was only a matter of time.
So we urged him to act — and with our help, he did.
I’m sharing this story because, in my last few emails, I’ve been exploring what to do when you’re lucky enough to have significant cash sitting in the business.
The starting point is clarity on your business’s long-term strategy. Are you planning to grow? Exit? Or is your business primarily there to support your lifestyle — in which case it might make more sense to take some of that money out and use it personally?
But as this story shows, there are also practical — and potentially costly — financial issues to consider.
Tax is a big one. So is the rate of interest (or yield) you could be earning, and your business cash flow. And don’t forget inflation, which can quietly erode the value of your money if it’s just sitting in a low-interest account.
Then there’s protection. Most business owners don’t realise that if your bank goes bust, only £85,000 of your deposits are protected. That can have a huge impact on where you park your cash — whether it’s spread across different banks or moved into higher-yielding alternatives (I’ll share one next week that might surprise you).
In short, deciding what to do with spare cash isn’t just a strategic decision — it’s a potentially complex financial one, too.
That’s where Insight Associates can help.
When we work together, we’ll guide you through all the key questions — so you clearly understand the financial implications of every option available to you.
You’ll have clarity, not stress.
And when it’s time to take action, we’ll be right there with you — so implementation isn’t something you have to worry about either.
It’s all part of how we help our clients get a deeper understanding of their financial position, make smarter decisions, take control of their finances and build a stronger, more resilient business.
To find out more about how we can help you grow much faster and increase your profit, please get in touch today. Simply email garry@insightassociates.co.uk or call our office on 01279 647 447 to book a no-obligation consultation with myself, or with one of our specialists.
We’d love to help you.
Warmly,
Garry
