Should You Invest Company Money?

A recent conversation that might sound familiar.

I was speaking with a business owner recently who had a challenge that many companies face right now. Their business was doing well, and over the past few years, they had built up a sizeable cash reserve. That money was sitting in the company bank account, safe and accessible — but not doing very much.

With inflation running above deposit rates, the "Silent Thief" is quietly eroding the real value of those funds.

This business owner asked me a question I hear more and more often:

"Should I be doing something smarter with this money instead of leaving it on deposit?"

It's a fair question, but as I explained to them, there's rarely a simple yes or no answer.

The world isn't as predictable as it used to be.

When I first started out in financial services nearly three decades ago, business planning felt a little more straightforward. You could project cash flows with a decent degree of confidence, make plans, and execute them.

Today, the world feels different. It's what we call VUCA: volatile, uncertain, complex, and ambiguous.

Supply chain disruptions, sudden shifts in customer demand, tax changes, and global events can throw even the most carefully run company off balance. That's why, before we even talk about investing, I always advise business owners to take a hard look at their cash flow needs.

In this case, the client had mapped out expected expenses and tax liabilities. But when we stress-tested the numbers, we realised that if a few big invoices were delayed or an unexpected cost cropped up, the company could find itself under pressure.

My advice was simple: hold back more than you think you need. Even if you believe €400,000 is enough to cover the next year, keep a bit extra — perhaps €500,000 — as a buffer against the unknown. This gives you peace of mind and ensures the business can keep running smoothly no matter what happens.

Moving gradually, not all at once.

Once we agreed on a comfortable liquidity buffer, we turned our attention to the remaining surplus. The temptation can be to invest it all straight away, especially when deposit rates feel so unappealing. But I've seen too many companies rush in and later regret locking up funds they suddenly needed.

A smarter approach is to stagger investments over time. In this case, the client decided to place a portion of the surplus into a diversified investment now, with a plan to add more in twelve months once we have greater clarity on both business performance and the wider economy.

This way, they start putting money to work while keeping flexibility in case of unexpected changes.

Why tax matters more than you think

Another key part of our conversation was taxation. When a company invests, the returns are treated very differently than personal investments. For most companies, gains are taxed at 25%, and there can be a second layer of tax when the owner eventually takes the money out personally. Without proper planning, this "double hit" can erode much of the benefit of investing.

In this case, we explored whether using some of the surplus for pension contributions might be a better fit. Growth within a pension is tax-free, and for many owners, this can be a far more efficient way to grow wealth.

This is where my experience at Irish Life has proven invaluable. During my years there, I worked in investment oversight, reviewing products and strategies to ensure they were appropriate and compliant. I've seen behind the scenes of how investments are structured, and I know how to cut through marketing language to get to the reality of risk, cost, and suitability.

Aligning business and personal goals

Ultimately, investing company money isn't just about chasing higher returns. It needs to fit into the bigger picture: the company's growth plans, the owner's personal financial goals, and even long-term succession planning.

With this client, our strategy wasn't simply about finding a higher return than a deposit. It was about balancing three things: keeping the company safe and liquid, beating inflation over time, and building personal wealth in a tax-efficient way.

The takeaway

If you're a business owner sitting on surplus cash, you may be feeling uneasy about leaving it on deposit while inflation chips away at its value. But the answer isn't to dive headfirst into investing.

Start by understanding your company's true cash flow needs — and hold back a little extra as a hedge against today's unpredictable world. From there, consider investing gradually, with a strategy that takes account of tax, risk, and both your business and personal goals.

This is where having an experienced adviser matters. With nearly three decades in the industry — and years spent overseeing investments at one of Ireland's largest financial institutions — my role is to help you look beneath the surface and make fully informed decisions.

The goal isn't just to "beat the deposit rate." It's to make your money work for you without compromising the stability of your business.

If you'd like to explore whether investing company money is right for you, let's have a conversation.

You can reach me directly at Liam@frontrowadvisory.ie or on 087 258 9896.