Excess Business Cash
Cash is a resource. Use it wisely.
What This Means
Many business owners are excellent at generating income but don’t spend enough time deciding what to do with the cash they accumulate.
I see it all the time. Cash feels safe. It provides peace of mind, helps cover unexpected expenses, and gives you flexibility. Every business should have an emergency reserve and operating cash.
The problem isn’t having cash. The problem is having more cash than you actually need. Holding too much business cash can create a hidden cost because money sitting idle isn’t earning a return or keeping up with inflation.
Once you’ve established an appropriate reserve, every additional dollar sitting idle has an opportunity cost. It isn’t growing, it isn’t compounding, and inflation is quietly reducing its purchasing power year after year.
That’s why one of the most important questions every business owner should ask is, “How much cash do I actually need?” Once you know that number, you can begin putting the excess to work in a way that aligns with your long-term goals.
For a business owner money is a tool. It should either be protecting your business, funding your lifestyle, or helping you build wealth. If it’s doing none of those things, it may be time to rethink how much cash you’re holding.
Common Questions
How much cash should a business owner keep?
There isn’t a one-size-fits-all answer. It depends on your monthly expenses, the stability of your business, upcoming projects, and your comfort level.
As a general rule of thumb, I like to see at least 3–6 months of expenses in cash. For many business owners, 6–12 months may be more appropriate because income can fluctuate and unexpected opportunities or expenses can arise.
The goal is to have enough cash to handle expected and unexpected needs—without allowing excess cash to sit idle indefinitely. Once you’ve determined the amount that helps you sleep well at night, the rest of your money should be working toward your long-term goals.
Isn’t cash the safest place for my money?
Cash is one of the safest assets in terms of stability, but it’s not risk-free. Over time, inflation gradually eats away at your purchasing power, making your cash effectively worth less.
The goal isn’t to eliminate cash—far from it. The goal is to know how much you actually need to feel comfortable and keep your business running smoothly. Once you’ve reached that number, ask yourself whether the rest of your cash could be working harder for you.
What’s the best place to keep my reserve fund?
What should I do with my excess cash?
When should I invest excess business cash?
Remember This:
Hold the cash you need. Invest the cash you don’t.