There’s no doubt about it: Filing your business taxes can be, well, taxing. The good news is that you may be getting a tax refund. If you filed your taxes early enough, you may have already received a check from Uncle Sam.
Now, the big question is: What are you going to do with that newfound cash? It’s certainly enticing to spend your refund right away by paying off bills or cutting bonus checks for your employees. But before you hastily spend that money, you might want to consider how you can effectively put that tax refund to work for the long-term growth of your business. To help you along, we’ve come up with five ways you can spend that money wisely.
5 Ways to Spend Your Tax Refund (Wisely)
Power to the people
Your employees are your best resources, and investing in training your team is a smart way to use your recent windfall. Training programs and resources help keep employees productive, engaged, and more actively involved in contributing to your company’s success. To boot, employees will feel more valued—boosting morale and resulting in a happier workforce. In fact, top factors for workplace engagement include opportunities to use skills and abilities and contributing to the company’s business goals, according to a research study published by the Society for Human Resource Management (SHRM) in 2015.
All systems a go
It’s no secret that technology changes fast. Even the systems you bought just last year may be in need of an upgrade. Or perhaps you put off buying new accounting software or marketing tools because new technology wasn’t in your budget. Well, now may be the perfect time to take a look at the systems you have in place and those that are on your wishlist. Even earmarking a small amount toward technology can help improve the efficiency of your business and free up your team to work on new projects.
Save it for a rainy day—or next year’s tax bill
If there’s nothing you absolutely need to invest in right now, it’s always a good idea to sock that money away so that it’s available when you need it. Although you could invest your money in the stock market, a savings account or short-term CD is a smart idea if you plan to use it in the near future. Also, you may not be so lucky in 2017, so if you have to pay Uncle Sam, you’ll have the money readily available.
Spending your tax refund on energy-efficient systems may not be at the top of your list, but you’ll be glad to know that the federal government offers rebates and tax credits on certain types of energy-saving business expenditures. Better yet, buying certain energy-saving products could also mean ongoing savings in the way of lower electric and heating bills. For example, if you install solar panels on your business property, you may be able to deduct 30% of the cost of the system off your federal taxes, according to solar provider SolarCity. You can even roll over your solar tax credit to next year if you don’t expect to owe taxes this year. Rebates and state tax credits on various other systems and products, including heating, lights and insulation, are available as well. Rebates and tax credits vary state to state. To see what you might qualify for, you can view a list of savings on the Federal Energy Department’s website.
To help fund your business, you may have taken out a small business loan, home equity line, or eaten away at your business credit card access line. With your influx of cash, this is a good time to review what you owe and determine whether you can allocate any of your tax refund dollars toward paying down your business debts. In the long run, lowering debt and your payments will free up your company’s available cash flow. This way, you can begin spending your money on other resources with the ultimate goal of expanding your business.
To learn more about ways in which you can save, spend, or invest your tax refund, it’s a good idea to discuss your options with an accountant or financial advisor.