Savings Options for Small Businesses, Part 1.

Savings Options for Small Businesses

As tax season approaches, small business owners begin turning their attention to numbers—income, expenses, deductions, and what April may bring. It’s a time of review and reflection, but also an opportunity to think strategically about what comes next.

It’s also when many owners say, “I know I should be saving more, but I’m not sure where to start… or what my options even are.”

In this three-part series, Smallbizmke Advisor’s Desk Contributor Dan Stich outlines practical ways small business owners can think about savings. In Part 1, he begins with the foundation: short-term savings and cash flow—the money you need available over the next six months to keep your business stable and prepared for whatever the year brings.

Part 1: Looking Over the Crowd: Why Short-Term Planning Matters

By Financial Planner Dan Stich, CPFA

I like to use a simple picture to explain how business owners think about money.

I’m 6’7″ and my wife is 5’7″. When we’re in a crowded place with our three kids, she’s focused on keeping everyone close and not tripping over what’s in front of us. I, thanks to my height, can see over the crowd and look ahead to where we need to go next.

Most small business owners live in that “here and now” zone: paying bills, managing payroll, covering inventory or material costs, and keeping the doors open and the lights on. That’s absolutely necessary. But someone also needs to be looking “over the crowd” toward the many months and years ahead, anticipating slower seasons, big expenses, or changes in the economy.

This is why it’s important to think about savings in terms of different time frames—not just what’s needed today.

Short-Term, Mid-Term, Long-Term: Different Goals, Different Tools

I encourage small business owners to think of savings the same way individuals do:

• Short-term (0–5 years): operating cash, emergency funds, near-term projects
• Mid-term (5–10 years): bigger investments, expansion, major equipment, debt reduction
• Long-term (10+ years): owner retirement, business exit, legacy

In this first post, we’re staying with that short-term bucket—the money that keeps your business stable and gives you room to breathe.

Short-term savings are there to:

• pay vendors and suppliers
• cover payroll and benefits
• weather slower months
• handle minor emergencies (a repair, a breakdown, a surprise bill)

If you’ve ever felt “cash poor” while the business looks busy from the outside, you already know how important this bucket is.

How Much Should a Small Business Keep in Cash?

When I talk to individuals about personal finances, I often recommend aiming for 3–6 months of expenses at their disposal. I don’t see small businesses as much different. If you can build 3–6 months of operating costs, you give yourself enough of a runway to survive economic downturns, illness, loss of a key customer, or just an unexpectedly slow season.

That amount can feel impossible if you’re operating very lean or still in early growth. The point isn’t perfection—it’s direction:

• Start by knowing your monthly operating costs (rent, payroll, subscriptions, utilities, basic supplies, insurance, etc.).
• Aim first for one month of expenses in reserve.
• Then, over time, build toward three months, and eventually six, if possible.

Even moving from “no cushion” to “one month of cushion” can make a major difference in your stress and decision-making.

Where to Keep Short-Term Money: Checking, Savings, Money Market?

Once you start building a cushion, the next question is: Where should that money sit? Most owners are familiar with:

• Business checking account – highly liquid, but often earns little to no interest
• Standard savings account – a bit of interest, but usually very low

I see many owners leaving large cash balances in checking simply because that’s what they’ve always done—or because no one has suggested an alternative. One of the most overlooked tools, in my view, is the money market account.

Why Consider a Money Market Account?

• It often functions very much like a checking account (you can move money in and out when needed).
• It typically offers higher interest than a standard savings account.
• It’s still a short-term, relatively low-risk place to hold your operating cushion.

In a higher-rate environment, money market accounts have offered significantly better returns than regular checking and savings—with similar flexibility. For a business with a couple hundred thousand dollars of cash on hand throughout the year, that difference adds up.

You’re already doing the hard work to earn that money. Putting it in a slightly better vehicle allows it to work harder for you.

Keeping It Clean: Separate Business, Personal, and Tax Accounts

Another short-term savings principle I stress is keeping your accounts separate. That means:

Separate business and personal accounts.

• Don’t commingle funds.
• It keeps your books clearer, makes tax time easier, and can provide legal and liability protections depending on your structure.

Consider a separate tax savings account.

• Many owners pay quarterly estimated taxes.
• Setting up a dedicated “tax” checking or savings account and moving money into it regularly reduces the pain of those quarterly payments.
• Keeps you from “accidentally” spending money that really belongs to the IRS or the state.

I often see business owners who keep all funds flowing through one main account. That can make it hard to see what’s truly available for daily operations, taxes, planned savings, owner compensation, etc. Segmenting your accounts gives you a clearer picture of your cash flow and makes savings more intentional, not accidental.

How a Financial Planner Works With (Not Against) Your Banker

How can a financial planner such as myself help with savings options compared to a banker? Are we doing the same thing?

My answer? We’re complementary, not competitive.

Your banker helps you with:

• Checking and savings accounts
• Loans and credit lines
• Day-to-day banking needs

A financial planner like me helps you:

• Understand your monthly and annual cash flow needs
• Decide how much should stay liquid vs. how much can be set aside
• Think through short-, mid-, and long-term savings goals
• Explore retirement accounts and other savings tools beyond the bank

A good planner like me can look at your numbers with you and say:

•  “Here’s what you need to keep accessible for 1–3 months.”
•  “Here’s what could be moved into a money market or high-yield savings.”
• “Here’s what might be available for longer-term savings.”

You still work with your banker to open and manage the right accounts—but you’re doing it with a clearer strategy.

The Goal: Cash-Strong, Not Cash-Poor

You don’t want your business to be:

• Cash poor (no breathing room),
• Savings poor (no cushion for emergencies), or
• Retirement poor (nothing set aside for the owner’s future).

Short-term savings are the first line of defense. If you can understand your monthly operating costs, gradually build an emergency and opportunity fund, and keep that money in accounts that earn something without locking it away, you’ll be better equipped to handle whatever the next year brings.

What’s Next in the Series

In Part 2 of this series, we’ll look at what happens when you have extra cash at the end of the year:

• Should you spend it on such items as equipment or signage just to reduce taxes?
• Are there smarter ways to use those dollars?
• How can you avoid “panic spending” and turn good years into long-term strength?

In Part 3, we’ll dive into retirement and long-term savings options for small business owners—and why relying solely on selling your business someday can be risky.

For now, Part 1 leaves you with a simple question:

If your revenue stopped tomorrow, how many months could your business keep going?

If the answer makes you nervous, it might be time to start building that short-term safety net.

Daniel Stich, CPFA — And Small Business Milwaukee Advisor
Stich Financial Partners
Independent financial & insurance planning. Multiple carriers. Client-first approach.
N27 W23957 Paul Road  |  Suite 105  |  Pewaukee, WI 53072