in South Australia
Issue No. 6 - July/September 2002
Investment Strategy that’s Right Under your Nose
by Max Baldock
Need a safe investment strategy that you are able to closely monitor and control for those GST and other tax dollars that are accumulated between BAS returns? Would you like dividends far in excess of bank rates, overdraft savings or in fact most investments on the stock market, and yet be in the very low risk category?
Then this next business management strategy is for you.
Cash flow generated from tax collection has a natural conclusion date at the end of each BAS return—for most businesses this is at the end of every three months. Effectively, this means that businesses have a cumulative cash flow that can be accurately predicted and which is available free of charge for four months (payment not due for 28 days after the end of each quarter) that can be invested. Providing a business can securely invest this money in a system that allows ready access periodically to sufficient funds to cover the periodic tax liability, whilst at the same time returning a worthwhile dividend, then good business practice would demand that such an investment be made.
The basic premise to keep ‘stock on hand’ levels sufficiently low to cover foreseeable sales or orders, so that cash flow is not restricted, is undeniably true. However, if stock that you normally used was was offered to you at a discounted rate, would you be prepared to increase your stock levels if you were able to use all the stock sometime into the future? Add to that the possibility of someone else’s money making the purchase on a loan—free basis—would you be interested now?
If so, this strategy may be for you.
Create a book (or computer file) that lists those products that you use or stock in your business. In columns alongside the products, list:
- life of product
- amount and frequency of use
- usual supplier
- normal cost of product to you
- whether it is sometimes/often discounted.
From this listing identify those products that would make the...
