Are You Making the Most of the Cash in Your Business?

Sam Whatsize Independent Financial Advisor

June 29, 2026 6 min read

Is your cash sitting idle? There are smart, tax-efficient ways to invest business profits that can benefit your personal wealth and strengthen your business’ future resilience.

If your business has built up a decent amount of cash over the past few years, it’s a good indication you’re in a strong position. But what is that money doing for you right now, and could it do more?

For many business owners I speak to, the answer is that it’s doing very little. It’s sitting in the bank waiting for a future that hasn’t quite been defined yet. That’s completely understandable. Cash gives you security, it gives you options. But leaving too much of it idle for too long can be a missed opportunity to build a stronger and more secure future for the business, for you, and for your family.

The starting point is to identify “what is spare cash”

Before doing anything, it’s a good idea to take a step back and look at your overall position. Broadly speaking, most businesses have three types of cash:

Money you need to run the business day to day
A buffer for the unexpected
The rest: cash that isn’t earmarked for anything in particular

It’s this third pot that’s worth thinking about more carefully. It’s not about taking unnecessary risks, it’s about being intentional with what you’ve built up.

Why leaving it alone isn’t always the safe option

Doing nothing might feel like the safe choice – and of course you don’t want to make your business financially vulnerable or insecure – but leaving money sitting still without a clear purpose brings its own risks. Over time:

Inflation eats away at the real value of your cash
Standard business accounts rarely provide competitive interest rates
Opportunities to grow or structure your wealth more efficiently pass by

So, what can you do with cash in your business?

There’s no one-size-fits-all answer here, but there are a few options to consider depending on your situation.

Get a better return

If you know you’ll need the money in the short term, we’re not talking about anything complicated.

It could simply be a case of:

Moving some funds into higher-interest accounts
Using notice accounts or fixed-term deposits
Investing in short-dated gilts (backed by the UK Government)

You don’t want to do anything drastic, but you can still make sure the cash is doing something until you need it.

Consider investing some of it through the business

Cash that isn’t likely to be touched for a few years opens up more options. This is where many business owners start to consider their longer-term objectives and whether they can grow the money in their business to achieve those goals. Investments can be set up in the trading company or, alternatively, you can invest through separate investment companies. The makeup of this portfolio can take many forms and meet almost any need, while reflecting your goals and timeframes.

Done properly, investments can:

Give your money the potential to achieve greater growth compared with cash
Provide more flexibility compared with other more illiquid investments, such as property
Reduce the potential inflation drag of leaving everything in cash
Protect the cash in the event of legal proceedings

It’s really about matching the approach to how long you can afford to leave the money untouched.

Think about how and when to take money out

This is the part many people put off. Building cash in the business is one thing but extracting it in a tax-efficient way is another. You’ll already be familiar with salary and dividends, but don’t overlook the benefits of making employer pension contributions.

This approach can be surprisingly powerful because:

The business gets significant tax relief
You’re moving money into a tax-efficient personal environment
You’re building something outside the business itself

For many owners, it’s one of the cleanest ways to turn business profits into long-term personal wealth.

Remember the bigger picture

Quite often I see business owners doing very well and building up strong cash reserves. That’s fine to a point, but it does create a concentration risk because a large proportion of their wealth is still tied up in the business itself. Using surplus cash to gradually build wealth outside the business, whether through pensions or investments, can help create balance and flexibility in the future.

A simple way to think about it

It helps to think of your cash in layers, rather than as one big pot:

Short-term – money you need to access
Medium-term – money you might use in a few years
Long-term – money that can be put to work properly

Once separated out like that, it tends to bring clarity to your decision-making process.

Final thought

Your business has already done the hard work; it has generated cash. The next step is to make sure that cash starts to work for you in return. That might mean earning a bit more on what you’re holding, structuring things more tax-efficiently, or starting to build wealth outside the business. Whatever route you take, the key to a more certain future is having a plan rather than standing still by default.

This is exactly the kind of conversation I have with business owners day to day. Usually it starts quite simply, understanding what’s there, what’s needed and what isn’t, and then working through the options in a clear and straightforward way that feels sensible and practical.

If it’s something you’d like to explore, TC Financial Planning is here to help.

FAQs

What’s considered spare cash in a business?
Spare cash is money that is not needed for day-to-day operations or set aside as a contingency fund. It is cash that is not currently earmarked for a specific purpose and may be available for investment or longer-term planning.

Why shouldn’t I leave excess cash sitting in a business bank account?
While holding cash provides security and flexibility, large balances held in standard business bank accounts may lose value over time due to inflation and often earn relatively low returns. This can result in missed opportunities to grow or structure wealth more efficiently

How can my business earn a better return on surplus cash?
Depending on your objectives and timescales, options may include higher-interest deposit accounts, notice accounts, fixed-term deposits, or short-dated government gilts. The most appropriate solution will depend on your business needs and cash flow requirements.

Should I invest spare cash through my business?
If you don’t expect to need the money for several years, investing through the business may be worth considering. However, the right approach will depend on your business objectives, risk appetite, and overall financial position.

Can investing business profits help with long-term wealth planning?
Yes. Surplus cash may be used to support wider financial goals, including building long-term wealth, creating additional financial security, or supporting future succession and retirement planning.

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