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What to Do with Your Cash as a Business Owner in This Environment

As a business owner, you understand the importance of cash flow and the need to make wise decisions about managing your funds. In uncertain economic times, it becomes even more crucial to evaluate your options carefully. In this blog post, we will explore different avenues for business owners to consider when deciding what to do with their cash in the current environment. Let's dive in!

Checking Account

A checking account is a basic and essential tool for any business. It provides easy access to your funds, allowing you to pay bills, manage payroll, and operate your business smoothly. It is important to ensure that your bank offers FDIC insurance, which typically provides coverage up to $250,000 per account holder. If you have multiple entities, such as state-level entities and a holding entity, consult with your bank to ensure you are receiving FDIC insurance for each account.

  • Benefits:

    • FDIC insurance safeguards your funds.

    • High liquidity allows for easy movement of money.

  • Drawbacks:

    • Low interest rates mean your cash won't generate significant returns.

Business Savings Account

A business savings account is an excellent option for storing cash that you don't need immediately. These accounts usually offer higher interest rates compared to checking accounts and are also FDIC insured.

  • Benefits:

    • FDIC insurance protects your funds.

    • High liquidity ensures easy access to your money.

    • Higher interest rates than checking accounts.

  • Drawbacks:

    • While interest rates are higher, they are still relatively low.

    • Typically, you cannot fund day-to-day operations directly from this account.

Money Market Funds

Money market funds are investment options that allocate your cash into short-term debt securities, such as Treasury bills and commercial paper. They often provide higher interest rates than traditional checking or savings accounts, but they are not FDIC insured.

  • Benefits:

    • Higher interest rates compared to traditional accounts.

    • Some money market funds may be tradeable and transferable between institutions.

  • Drawbacks:

    • Lower liquidity with settlement periods ranging from 1 to 5 days.

    • Cannot be directly used for operational purposes like ACH transfers or issuing checks.

    • Not FDIC insured, which means they carry more risk.

Treasury Securities

Investing in treasury securities involves purchasing debt securities issued by the U.S. government. They are widely considered to be one of the safest investments available. Treasury securities offer various maturities to choose from, but like money market funds, they are not FDIC insured.

  • Benefits:

    • Higher interest rates compared to traditional accounts.

    • Considered one of the safest investment options due to the backing of the U.S. government.

  • Drawbacks:

    • Liquidity risk exists, as selling these investments quickly may be challenging.

    • Cannot be used for day-to-day operational needs.

    • Not FDIC insured.

Choosing the right option for your business depends on your specific needs and risk tolerance. If safety and FDIC insurance are paramount, a checking account may be the most suitable choice. However, if you seek higher interest rates, a business savings account or money market fund might be more appealing. On the other hand, if safety is your primary concern and you're willing to accept lower interest rates, treasury securities can be a viable option.

It is essential to conduct thorough research and compare different options before making a decision. Consider your investment goals, risk tolerance, and liquidity requirements. Consult with a financial advisor if needed to ensure you make an informed choice aligned with your business's financial objectives.

In conclusion, managing your cash effectively as a business owner requires careful consideration of available options. Assessing your needs, risk appetite, and the current economic environment will help you determine the best course of action. Remember, each option comes with its own set of benefits and drawbacks, so make sure to weigh them against your specific requirements. Additionally, keep in mind that diversification can be a prudent strategy to mitigate risk. Spreading your cash across different accounts or investments can help safeguard your funds while potentially maximizing returns.

It's also crucial to regularly reassess your cash management strategy as market conditions and business circumstances evolve. Stay informed about changes in interest rates, economic indicators, and regulatory developments that may impact your decision-making process.

Lastly, consider seeking professional advice from a financial advisor or accountant who can provide personalized guidance tailored to your business's unique needs and goals. They can help you navigate the complexities of cash management, optimize your investment strategy, and ensure compliance with relevant regulations.

By carefully evaluating your options, staying informed, and seeking expert advice, you can make informed decisions about what to do with your cash as a business owner in any environment. Remember, cash is indeed king, and managing it wisely is crucial for the financial health and success of your business.


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