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. By now, you may have already received a refund check from Uncle Sam.
Now, the big question is: What are you going to do with that 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 spend that money, consider how you can effectively put that tax refund to work for the long-term growth of your business.
To help you along, here are five ideas for how to spend that money wisely.
5 Ways to Spend Your Tax Refund (Wisely)
1. Power to your 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.
Morale might sound hard to define, but it has a major, quantifiable impact on your business success. According to the Engagement Institute, disengaged employees cost organizations between $450 and $550 billion annually due to losses in productivity and other factors. On the retention side, Qualtrics reports that employees with a high confidence level in their company’s senior leadership are 5 times as likely to remain with their employer more than 2 years compared to employees with no confidence. One of the best ways to retain star employees (and to keep all employees more engaged) is to invest in employee wellbeing, training and resources.
2. 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.
Now may be the right 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 new technology can help improve your business efficiency and free up your team to work on new projects.
3. Get ahead of the next tax cycle
If there’s nothing you absolutely need to invest in right now, this is a great time to make some plans for the future. With plenty of breathing room, you might take a look at the new tax law and any upcoming changes that may affect your business next year. You could review your investment plan, to make sure that your savings are growing.
Finally, you might use this time to find an accounting professional or financial advisor you can trust to work with, next time you need assistance or expert advice.
4. Seeing green
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.
5. Payback time
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 an influx of cash in the form of a tax refund, this could be 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.
Looking for more? Here are 10 more smart ways to invest your tax refund and grow your business.
This post was updated in May 2018.
Disclaimer: Fundbox and its affiliates do not provide tax, legal or accounting advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors before engaging in any transaction.
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