Topic
CFO Advisory
Articles tagged “CFO Advisory”.
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CFOWhat to Do With Surplus Business Cash: The 5-Bucket Rule
1. Surplus cash has a job before it arrives. Well-run companies don't "figure it out" when profit lands — they run it through a pre-decided hierarchy of five buckets. 2. The order is almost always the same: (1) protect the business with a cash buffer, (2) clear expensive debt, (3) reinvest in the business, (4) acquire or partner for growth, (5) return to owners. 3. Most MSMEs skip straight to Bucket 3 or Bucket 5 — they expand or the founder withdraws — without asking whether the buffer and the debt were handled first. 4. The test that matters: before any rupee of surplus is deployed, ask whether the reinvestment will earn more than your cost of capital. If you can't answer that, you're guessing, not allocating. 5. Capital allocation is the highest-leverage decision a founder makes — bigger than any single sales push, because it compounds every year.