How much cash should you keep in your business checking account?

Effective cash flow management is the cornerstone of running a successful business or nonprofit. While maintaining a robust checking account balance is essential for covering day-to-day operations, keeping too much money idle in your business account may hold you back from financial growth. So, why should you have a cash reserve, and how much cash should you have in your business account? Let’s dive into finding the balance that works best for your organization.

Finding the right balance 

The amount of cash you should keep in your checking account depends on your business’s unique needs. Experts often suggest maintaining enough funds to cover two to three months of operational expenses. This ensures your business can handle regular payments — like bills and payroll — as well as unexpected costs.

However, keeping too much cash in your business account could be limiting your growth potential. Since checking accounts earn little to no interest, surplus funds may lose value over time. Instead, moving excess money to a financial tool like a money market account can help your organization make the most of its resources, achieving the ideal balance between liquidity and growth.

Why have a cash reserve? 

A cash reserve provides stability, enabling your business to navigate unforeseen challenges with ease. It’s also vital for sustaining operations during seasonal fluctuations or economic downturns. But how much money should a business save to balance peace of mind and opportunity?

The answer lies in aligning your cash flow management strategy with your organization’s financial priorities. Whether you need to reinvest profits, expand operations, or prepare for emergencies, the right balance is key.

Balancing peace of mind and growth 

Keeping a higher checking account balance offers peace of mind, ensuring your business can handle unforeseen expenses without stress. However, it might limit your ability to maximize returns on idle funds. On the other hand, keeping a lower balance frees up cash for investments or higher-yield savings options — but could leave you unprepared for unexpected costs.

That’s where a money market account can make all the difference. A money market account is a type of account that typically offers higher interest rates while allowing for some spending flexibility. For example, with UBT’s Value Edge Money Market account, you can deposit into the account at any time, and you’re allowed six free debit transactions per statement cycle. (Note that there’s a $25 fee per each additional debit transaction.) 

By moving excess funds into a money market account, your business can enjoy the best of both worlds — accessibility and spending flexibility, combined with the potential for higher interest earnings. This approach allows your cash reserves to work harder while still remaining within reach when you need them most.

The key is understanding your cash flow and financial priorities to strike the perfect balance for your organization.

The bottom line

Cash flow management isn’t just about having enough money in your business account — it’s about finding the right mix of liquidity and growth. By maintaining sufficient funds for essential expenses and putting surplus cash to work, your organization can optimize its financial strategy and set the stage for long-term success.

Boost growth with accessible savings

If your organization consistently ends the month with excess funds, it’s time to explore smarter options for managing that money. And right now, your business can earn up to 3.80 APY* for 12 months on balances of $10,000 and up (0.85% APY* on balances under $10,000) when you open a new Value Edge Money Market account with at least $10,000 in new money. It’s smart business and banking you can feel good about. Stop into your nearest branch to get started today or click here to learn more!