James Clear, the author of Atomic Habits, reminded each of us, “You do not rise to the level of your goals; you fall to the level of your systems.” Everyone needs a system of managing their cash to reach their goals in business and life. One thing we commonly see as certified financial planners working with practice owners is that they often have excessive business cash on hand. Holding some money is a smart move for an owner, but at some point, the level becomes unproductive.

You must be intentional with your cash and create systems to help you achieve your personal and business goals. To wit:

• Where are good places to hold cash?
• What types of savings accounts should you consider?
• What should you do with excess cash?

We’ll answer four questions we often hear.

1. Where Are Good Places to Hold My Cash?

Start with business checking and business savings accounts. Think of your checking account as the money-in, money-out repository. It’s the quarterback of your cash planning. It receives income and distributes money elsewhere to cover specific needs and goals.

Don’t hold excess cash in checking accounts for long periods. If you do, you miss the opportunity to earn interest income. Checking accounts historically have abysmally low interest rates or, worse yet, pay nothing.

If you hold excess cash in a business savings account, make sure it’s a high-yield one. Be careful, especially in today’s environment, because some business accounts do not offer meaningful interest rates. A standard rate in 2025 is 3% or better, so if your business account sits at 0.01%, you should move the money. (Review savings account options at bankrate.com or nerdwallet.com.) Your savings account must be FDIC-insured and does not need to be at a local bank. High-yield savings rates are customary online. The financial institutions’ reduced expenses from not paying for brick-and-mortar offices allow them to provide higher interest rates to customers.

2. Should I Consider Any Other Accounts?

The first one besides a money-in, money-out checking account is an operations account. It’s for holding cash to keep the lights on and in case of an emergency.

Start by evaluating your monthly expenses as a business (rent, payroll, insurance, 401(k) contributions and fixed costs). Alongside your tax adviser or financial planner, establish a minimum amount to keep in the operations account as revenue fluctuates throughout the year. The most common strategy is to choose the number of months you want to set aside money for operations expenses. We often see two to four months. Make sure to continue the conversation as your practice evolves. As your fixed expenses grow, so should the floor in your operations account.

The second one to consider is a tax account. Deposit money there each time cash inflows occur to match the quarterly estimated tax payments that most practice owners make. The amount needed to flow here is determined through your tax planning with advisers. Unexpected tax bills in any given April are a planning problem, not a tax problem. You can eliminate surprises if you have good bookkeeping and speak regularly with your CPA.

The third one to consider is a major purchases account. It holds money for significant one-time acquisitions of practice equipment and real estate. It can also be a great place to stockpile cash for employee bonuses, year-end profit-sharing contributions to your 401(k) or cash balance plan contributions.

3. Why Should I Consider Three Different Savings Accounts?

It’s about intentionality and clarity. Having three is a terrific tool for recognizing when you’re holding onto too much business cash.

4. What Should I Do With Excess Cash?

Think about using excess cash to serve you and your goals. Holding excess cash can expose you and your practice to unnecessary liability. Depending on how you structured your business, moving excess cash outside of business accounts can help reduce the exposure if your practice is sued or held liable. That’s one reason you must consistently evaluate and adjust your account balances when you notice an excessive amount.

First, evaluate your personal emergency fund. Do you have enough to cover three to six months of living expenses? We sometimes see practice owners with too much business cash and an inadequate personal emergency fund. Ask your CPA if you should push cash to your personal accounts. You might transfer money to increase your emergency savings or to cover a major personal purchase, such as a home or vehicle.

Second, consider additional retirement plan contributions, such as maxing out your personal allocation, making a profit-sharing payment to benefit yourself and your employees, or adding a cash balance plan.

Transferring excess cash to retirement plans is a smart move. Why? Because the money goes into your or your employees’ accounts, your business gets an income tax deduction, the money grows tax-deferred for the long term, and you shield it from creditors. The right team of financial professionals can help customize a plan for additional retirement plan contributions.

Finally, look at a nonretirement investment account. It’s not earmarked for retirement, but it allows you to invest for the long term without the restrictions or penalties that most retirement accounts incur when withdrawals happen. This type of investment account is critical for anyone looking to retire before age 60 because of no contribution limits and no early withdrawal penalties if you pull money out before age 59½. In addition, the taxation is at capital gains rates instead of ordinary income rates, like with a traditional IRA or pretax 401(k) account.

The End Goal

Maintaining a dual focus on business needs and personal finance plans can be difficult for practice owners. We recommend creating a system of savings and operating accounts with clear intentions, evaluating them regularly, and having a collaborative team of advisers to help you manage and navigate the plans as your life and business evolve.

QUOTABLE

James Clear also wrote in Atomic Habits, “Some people spend their entire lives waiting for the time to be right to make an improvement.”