If you got started early and Uncle Sam approved your returns, you might be lucky enough to be holding a nice little check (or direct deposit receipt) from the government. Your heart might already have plans for this extra income, but your brain (and we here at Nav) wants you to think twice before spending it.
That’s why we thought up 5 ways a smart small business owner might reinvest their tax returns into their business:
1: Pay off your highest-interest debt.
Whether you choose to pay off your highest interest credit card, loan, or trade line, using the cash infusion from your tax returns to pay off debt is a proven way to help your business in the long run. Investing 101 commonly teaches that by eliminating a high-interest debt, you effectively save (or pay yourself) the interest you otherwise would have lost to your monthly minimum payment.
Alternatively, you can take Dave Ramsey’s debt snowball approach, which states that you should pay off your smallest debt first. Once that debt is paid off, you can then focus your efforts on the next-smallest debt, and so forth. No matter which methodology you ascribe to, paying down your business’s debts can afford you breathing room in the long run and serious satisfaction immediately.
2: Invest in better equipment.
If you sat down and listed the things that would make your business run more efficiently, where would new equipment fall on the list? What if we extended the definition of equipment to also include facilities and expansions? In many cases, small businesses function on a wing and a prayer, making due with the bare minimum. This is out of survival and necessity, but at some point, your business will benefit from eliminating the bottleneck that outdated equipment causes.
For example, a new point-of-sale (POS) system can present your business with streamlined options you never thought you had available. By incorporating new technology into your retail venture, you can enjoy easier credit card processing, more reliable receipts, and a workflow guided by dedicated applications. On a smaller scale, you can also invest a portion of your tax return into a business service to upgrade your accounting, email marketing, or website design. Sometimes even making small changes to your organization can reap big benefits.
3: Invest in your employees.
Most businesses can attribute their success to dedicated employees who deserve a bonus, a pay raise, a company car, and a month-long vacation. Obviously most of these rewards are far beyond the reach of small business owners, but with a portion of your tax return, you might be able to make a portion of their dreams come true.
If your return was a gargantuan surprise and you’ve got a star employee, you might consider giving them a nice pay bump or even a performance bonus. Since it’s more likely that your tax return will be largely spent otherwise, think about setting aside enough to give your employees a gift card for the local big box store. Want to really wow them without revealing anything about your returns? Create a little fund to bring in bagels and coffee once a month through the rest of the year!
4: Invest in more education or certifications.
This one really does fall into the category of investment, because it takes more than just money. Boosting your business acumen by taking a few classes or becoming certified in additional areas requires time, dedication, and the desire to push yourself to new heights. You could also invest in training and education for your employees as well. Depending on where you live, you might look into night classes at a local community college, university, or continuing education program. If such classes don’t exist in your area, look into online classes that you think will suit your needs and help you learn and grow.
Don’t be afraid to think outside of the box, either. Practically every business owner can benefit from marketing, accounting, or management courses. And because professors are an often-untapped source of knowledge, you can ask questions that will directly impact how you run your business.
5: Invest in a great Friday afternoon.
Who said that every investment needs to be so serious? Setting apart a small chunk of your tax return to spend with your employees could end up being your favorite part of tax season. Since we’re on the cusp of a beautiful spring, try picking a Friday that’s going to be nice outside and treat your employees to a simple catered lunch that won’t break the bank.
Want to take it a step further? Find a good matinee playing at your local theater and spend the afternoon enjoying some popcorn and laughs in the glow of the silver screen. Rewarding yourself for getting your taxes done can leave you with a smile on your face as well as some happy employees that’ll appreciate the break. You’ll pretty much be guaranteed smiles for the next week straight—something that is definitely worth the investment.
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