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A small business owner’s guide to managing funds and investments

Opinions expressed by australiabusinessblog.com contributors are their own.

As a small business owner grows over the years, one aspect of finance that they often overlook is the ability to use investments as a means to grow income, increase wealth, and improve overall financial build security for their business. The majority of small business owners don’t even think about this course of action because they don’t know about it, because they don’t think they can qualify for it, or because they aren’t familiar with how it all works. works.

At the time of writing, Q4 2022, rates are going up, making a larger purchase more expensive for a small business, and it also increases the cost of carrying balances on things like credit cards or other lines of credit. Savings accounts and CDs will fare better though, but this can all change and most likely will. So the question becomes, how do you take advantage of this style of opportunity? And did you know that, like Key Bank’s liquidity management solutions, your bank is designed to help you efficiently manage your liquidity positions over the short or long term?

When a small business owner is newer to this type of fund management method, going simple, short-term is a good way to start. Once there’s a comfort level, you may be able to look at more long-term aspects.

Related: The 5 Worst Cash Flow Mistakes Small Business Owners Make

1. Short term

Short term is exactly what it sounds like, but what that translates to (for normal people) is a year or less. This can be very beneficial for many small businesses, as tying up funds for periods longer than a year can often have a negative impact on a company’s annual tax operations.

Short-term Cash resources can be managed in three ways:

  • Operating cash: money needed for day-to-day operations. These funds are generally held in a current account or in investments that are highly liquid and offer instant access.

  • Reserve cash: usually serves as a buffer for unforeseen events. The investment strategy for this is quite conservative and the funds are usually held in a savings account.

  • Strategic Money: reserved for a specific purpose and period of time and held in term deposits or cash to earn higher returns. Our relationship managers work with you to determine the best combination of accounts to meet your liquidity and investment goals.

Related: 5 Cash Management Tactics Small Businesses Use to Become Bigger Businesses

2. Long term

Long-term investments are exactly what they sound like: longer-term than short-term. What that translates to is over a year. But honestly, a lot of what makes investments short or long term is how they are used on your balance sheet and also when the investments are sold.

A common form of long-term investing occurs when company A largely invests in company B and gains significant influence over company B without holding a majority of voting stock. In this case, the purchase price is shown as a long-term investment. However, that may not be up your alley as a small business owner. So definitely talk to your advisor to see if this makes sense for you now or in the future.

Here are some examples of long-term investments for a small business:

  • Income stock strategy: a long-term strategy that includes a range of distribution choices designed to identify well-known entities that offer above-average distributions without a high risk of default, such as large-cap and blue-chip stocks

  • Growth Stocks Strategy: seeks maximum appreciation of all stocks in the portfolio over a period of time, such as 10 years or so

  • Balanced investment strategy: intended to unite investments in a portfolio so that the risks and rewards can balance each other. Usually the stocks and bonds are of equal percentages of ownership for this type of portfolio. This can be a good strategy for a small business owner with a medium risk appetite.

  • Property: a great way to add assets to a company’s long-term growth strategy as it will increase in value over time and make a bigger profit when the owner sells the company.

Pro tip: Small business owners usually never consider doing long or short term investment management for their business. In fact, they never even open a simple Roth or traditional IRA because they think, “I’ll sell my business for millions!” Yeah, well, it usually never happens like that. So contact your financial advisor quickly and see which steps make sense for your company to grow, both in the short and long term.


Shreya has been with australiabusinessblog.com for 3 years, writing copy for client websites, blog posts, EDMs and other mediums to engage readers and encourage action. By collaborating with clients, our SEO manager and the wider australiabusinessblog.com, Shreya seeks to understand an audience before creating memorable, persuasive copy.

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