Spending, investing, or harvesting during uncertain times

return on investmentIn recent months, we have found that a large number of Australian businesses we speak with, are unsure about what to do financially in this current climate, understandably so. During a period of uncertainty, it is hard for us to know the best decisions we can make for our business especially in terms of spending, harvesting or investing money.

If we keep our funds in the bank the interest rates are not going to bring us a return much higher than 1%. Investing in labour, new equipment, or new product development is also not something we tend to do either in a period of uncertainty.

Naturally, we do not want to spend for the sake of spending, exercising caution, but investing in your business in a way that makes good financial sense might be the most sensible idea. Finding some way to add value to the business, and perhaps save money and bring a good return is well worth considering. The question is, what action can we take to benefit our business in the short- and long term, that is also low risk?

Taking a critical view of the likely return on investment is a good place to begin. For example, if we look at Government Bonds, considered to be one of the safest lowest risk investments, we can see the return is minimal, at around 0.25% which begs the question – is it worth it? Probably not unless one is completely risk-averse and all other investment options have been exhausted.

Alternatively, we can keep our money in the bank where a typical savings account will yield a little more than 1% p.a. with relatively low risk – again, still not exactly a return worth shouting about.

An investment in residential property can yield 8% p.a. which might be a better option. However, this type of investment requires a substantial sum and spans over a long holding period in an unpredictable property market.

Starting from just $30,000, an investment in solar PV for your business can yield over 14% per annum, depending on your usage and current electricity prices. This is an excellent return on investment over a shorter time-period with payback usually achieved in less than 3 years, and your business can be cash flow positive within the first year.

An investment in solar PV could also be considered as a harvesting strategy as it involves a reduction in electricity costs, positively affecting the bottom line and maximising profits. Call 1300 344 388 today for a business solar quotation or click here to contact us.

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