Small Business Cash Management

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Topic Author
EinAustin
Posts: 116
Joined: Wed Sep 28, 2016 7:17 pm

Small Business Cash Management

Post by EinAustin »

Hello Bogleheads.

I run a somewhat seasonal small business. I also tend to image the worst and think we will wind up going the rest of the year without money coming into the business.

Overall it's not a problem because our personal finances are great. But, it causes me to hold too much cash in our business account to make sure I can cover payroll, etc for 6- 8 months. In reality we've never gone very long without money coming in so my mentality isn't based in reality. It would be nice to at least have the money earning something in the Vanguard MMF vs the business account.

My question is if I distribute money from the business to personal and then the worst possible situation happens and we don't have enough funds in the business account temporarily can I give the money (or loan it) back to the company?

Thanks!
mcraepat9
Posts: 1832
Joined: Thu Jul 16, 2015 11:46 am

Re: Small Business Cash Management

Post by mcraepat9 »

Is your business entity taxed as an S-corp, C-corp, partnership or disregarded entity?
Amateur investors are not cool-headed logicians.
Topic Author
EinAustin
Posts: 116
Joined: Wed Sep 28, 2016 7:17 pm

Re: Small Business Cash Management

Post by EinAustin »

S Corp

Thanks!
NYCaviator
Posts: 2309
Joined: Sat Apr 09, 2016 5:06 pm
Location: NYC

Re: Small Business Cash Management

Post by NYCaviator »

EinAustin wrote: Mon Jun 10, 2024 2:37 pm S Corp

Thanks!
Pretty sure you can transfer money into the business as a capital contribution and it would even out any distributions you took, but I'd check with your accountant on that. There are business savings accounts out there you can look into. You can also open a Vanguard business brokerage (or Fidelity, Schwab or Merrill for that matter). The only issue I have with the biz brokerages is that they don't play well with accounting software so there's a lot more manual tracking with interest, transfers, etc.

EDIT: I'll add that you need to be careful how you operate the business for liability purposes. If you are constantly transferring money to personal and then back to the business, I've been told that could eliminate the protection your entity provides since you're basically using the business as an extension of your personal finances. For that reason alone, I wouldn't worry too much about keeping lots of $$ in the business account. That's just prudent business. But no harm in opening a high yield business savings.
Topic Author
EinAustin
Posts: 116
Joined: Wed Sep 28, 2016 7:17 pm

Re: Small Business Cash Management

Post by EinAustin »

Thanks for the details...I didn't even know what information would be helpful.

I'm only talking about losing about $5k. It's enough to be annoying but not enough to screw up the accounting. Plus the business savings accounts I have seen don't offer great rates, at least not at my current bank.

You make a good point about the liability but I am a single member LLC filing as a S Corp so it is likely not much protection anyway.
NYCaviator wrote: Mon Jun 10, 2024 6:28 pm
EinAustin wrote: Mon Jun 10, 2024 2:37 pm S Corp

Thanks!
Pretty sure you can transfer money into the business as a capital contribution and it would even out any distributions you took, but I'd check with your accountant on that. There are business savings accounts out there you can look into. You can also open a Vanguard business brokerage (or Fidelity, Schwab or Merrill for that matter). The only issue I have with the biz brokerages is that they don't play well with accounting software so there's a lot more manual tracking with interest, transfers, etc.

EDIT: I'll add that you need to be careful how you operate the business for liability purposes. If you are constantly transferring money to personal and then back to the business, I've been told that could eliminate the protection your entity provides since you're basically using the business as an extension of your personal finances. For that reason alone, I wouldn't worry too much about keeping lots of $$ in the business account. That's just prudent business. But no harm in opening a high yield business savings.
BuddyJet
Posts: 1148
Joined: Mon Jun 24, 2019 8:56 pm

Re: Small Business Cash Management

Post by BuddyJet »

EinAustin wrote: Tue Jun 11, 2024 10:07 am Thanks for the details...I didn't even know what information would be helpful.

I'm only talking about losing about $5k. It's enough to be annoying but not enough to screw up the accounting. Plus the business savings accounts I have seen don't offer great rates, at least not at my current bank.

You make a good point about the liability but I am a single member LLC filing as a S Corp so it is likely not much protection anyway.
NYCaviator wrote: Mon Jun 10, 2024 6:28 pm
EinAustin wrote: Mon Jun 10, 2024 2:37 pm S Corp

Thanks!
Pretty sure you can transfer money into the business as a capital contribution and it would even out any distributions you took, but I'd check with your accountant on that. There are business savings accounts out there you can look into. You can also open a Vanguard business brokerage (or Fidelity, Schwab or Merrill for that matter). The only issue I have with the biz brokerages is that they don't play well with accounting software so there's a lot more manual tracking with interest, transfers, etc.

EDIT: I'll add that you need to be careful how you operate the business for liability purposes. If you are constantly transferring money to personal and then back to the business, I've been told that could eliminate the protection your entity provides since you're basically using the business as an extension of your personal finances. For that reason alone, I wouldn't worry too much about keeping lots of $$ in the business account. That's just prudent business. But no harm in opening a high yield business savings.
Rather than a business savings, I opened a business brokerage account at Fidelity and used a money market to park cash. Any bond etf is also possible. Also, it is an easy ACH back and forth to your bank.


This keep everything in the business name and avoids accounting issues.
People say nothing is impossible. I do nothing all day.
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