How Business Owners Manage Cash Flow, Part 1

Managing your Business Cash Reserves

Welcome to the part 2 in this short series on managing the cash flow of your business. In the previous post we discussed how to create a priority of saving outline. At the end of the post I listed adding to long-term savings for the business or family. If your priority is building long-term savings for the business so you can later invest in people, equipment, technology, and more – I will discuss an example for how these savings could be invested.

Before getting to long-term business savings, I typically suggest taking care of a number of other items first, such as creating savings equal to 3-6 months of expenses for the family and the business along with other retirement savings. Once you have taken care of that, we can establish that the money is being invested for a timeframe beyond 1 year.

Cash need time frame

1-2 years: Consider CD’s that mature around the date you expect to need the funds

3-5 years: Consider a short-term bond ladder of corporate and treasury bonds that mature in 3-5 years.

5-10 years: Consider a mix of intermediate-term bonds and balanced funds with some exposure to stock.

10 years and beyond: Consider a more balanced portfolio, like what you may have for yourself – Depending on your risk tolerance, you may have up to 60% in stocks and 40% in bonds.

Disclaimer: Alex Voorhees and Reston Wealth Management do not provide legal, accounting or tax advice. This information is not intended to be a substitute for specific individualized tax or legal advice. We suggest that you discuss your specific situation with a qualified tax or legal advisor. The opinions voiced in this article are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investment(s) may be appropriate for you, consult your financial advisor prior to investing. No strategy assures success or protects against loss.