Business Money
Your Business Has a Plan. Does Your Cash?
Business owners make decisions all day long. What needs to be ordered? Which invoice needs attention? Is there enough inventory? Can you hire another employee? Is it time to replace a piece of equipment?
But there’s another question that’s easy to overlook:
What is the money sitting in your business accounts supposed to be doing?
Having cash available is essential to running a business. But as your business grows and changes, it can be helpful to think beyond today’s account balance and give different portions of your cash a purpose.
Start With What Keeps the Business Running
Every business needs operating cash—the money available for regular expenses such as payroll, rent, utilities, inventory, vendor payments and other day-to-day obligations.
The appropriate amount will look different for every business. A company with predictable monthly revenue may have very different needs from one that experiences significant seasonal swings.
Rather than focusing on a single ideal number, start by understanding your own patterns. When does money typically come in? When do your largest expenses occur? Which months tend to be tighter than others?
The better you understand your normal cash cycle, the easier it can be to determine what your business actually needs readily available.
Give Your Reserves a Purpose
Not every dollar outside of operating expenses is necessarily “extra.”
Some of it may be your safety net. Unexpected equipment repairs, delayed customer payments, increased material costs or a temporary slowdown can quickly change a business’s financial picture. Maintaining an appropriate reserve can provide additional flexibility when something doesn’t go according to plan.
You may also want to create reserves for expenses that aren’t unexpected at all—such as taxes, insurance premiums, annual purchases or planned maintenance.
When money has a defined purpose, you’re less likely to mistake funds earmarked for a future obligation for money that’s available to spend today.
Create a Separate Bucket for What’s Next
There’s also a difference between emergency savings and opportunity savings.
Maybe you’d like to renovate your space, purchase equipment, add another vehicle, open a second location, hire additional employees or launch a new service.
Those goals may be months or years away, but setting aside money specifically for growth can help you prepare for them.
And when an opportunity arrives sooner than expected, having resources available may give you more options.
Know When Cash Is Truly Excess Cash
Once you’ve accounted for everyday operations, upcoming obligations, reserves and future plans, you may discover that your business regularly maintains funds beyond those needs.
That’s when a conversation with your banking partner can be valuable.
Depending on your business, financial position, liquidity needs and goals, there may be different ways to structure your accounts or put excess funds to work while maintaining appropriate access to your money.
The key is knowing what each dollar is intended to accomplish before making that decision.
You can’t manage what you can’t see.
Business banking and cash management tools can provide a clearer picture of account activity, incoming funds, outgoing payments and available balances. That visibility isn’t only useful for bookkeeping—it can help you make more informed decisions about the business itself.
If you know that several large payments are approaching, you can prepare. If balances are consistently growing, you can start thinking about your next move. If cash flow regularly becomes tight at a particular point in the month or year, you can explore ways to address it before it becomes a problem.
Make Your Money Part of Your Business Plan
You already think strategically about your customers, employees, products and future. Your business’s cash deserves the same attention.
Start by asking four questions:
What do we need to operate? What do we need to protect? What are we saving for? And what is left after those needs are covered?
You don’t need to have every answer before talking with your bank.
At Artisans’ Bank, we take the time to understand how local businesses operate and where they want to go. From everyday banking and cash management to lending and other financial solutions, we’re here to help you build a banking relationship that supports your business today and as it grows. Speak with a Business Relationship Manager today or stop by one of our branch locations
Your business works hard for its money. Let’s make sure your money has a job, too.
We are here (in person and online) to be your partner and advisor wherever life takes you, your business, and your family, no matter your financial goals.
Artisans’ Bank: Member FDIC, Equal Housing Lender, NMLS# 774924, Equal Opportunity Employer