It's one of those questions that sounds simple but most business owners can't answer with a real number: how much cash should I have in my business checking account?
Some go by gut feel. Some just watch the balance and hope it stays positive. Some keep everything in checking and let it pile up without a plan. Very few have an actual target.
That's the problem. Running a business without a cash floor is like driving without a fuel gauge. You might be fine. But you won't know until you're not.
Here's a straightforward framework for setting your number.
What Marcus recommends is a static cash balance. It's a floor below which your checking account should never fall.
This isn't your operating balance. It's not what you spend day to day. It's a reserve. A cushion. Money that stays in the account specifically to protect the business from the things you can't plan for: a slow-paying client, an equipment failure, a slow month, an unexpected expense that can't wait.
The target: 60 to 90 days of cash outflows.
If 60 days feels aggressive to start, aim for 60 and build toward 90. Either number puts meaningful protection between your business and a cash crisis.
Start with your P&L. Pull up a recent month that reflects your normal operations. Not your best month, not your worst. A typical month.
Look at your operating expenses. These are the costs that keep the business running: rent, payroll, utilities, software subscriptions, insurance, professional fees, and so on.
Now remove two things from that list:
Interest expense: This is a financing cost, not an operating cash flow we're trying to reserve for.
Cost of goods sold: If you're a product-based business, you'll handle inventory separately in a moment.
What's left is your core monthly operating expense number.
Here's where most business owners underestimate their number.
Your P&L doesn't capture everything that leaves your bank account. Two categories in particular get missed:
Inventory purchases (product-based businesses): If you sell physical products, you need to factor in what you typically spend on inventory over a 60-90 day window. Look at your purchasing history and use a realistic average. This can be a significant number for product-based businesses, and leaving it out of your calculation means your "cushion" isn't actually big enough to cover a bad stretch.
Loan principal payments: When you make a loan payment, only the interest portion shows up on your P&L as an expense. The principal portion is the part that actually reduces what you owe, and it's a balance sheet transaction. It reduces your notes payable, but it also reduces your cash. It has to be in your calculation.
So the full formula looks like this:
Monthly operating expenses (from P&L, minus interest and COGS) Plus: average monthly inventory purchases (product businesses only) Plus: monthly principal payments on business loans Multiply by 60 or 90 days (2 or 3 months)
That total is your static cash floor.
Once you know your floor, the goal is to maintain it. Don't let cash pile up in checking above it.
Operating cash accounts typically earn nothing. Leaving $150,000 in a checking account when your floor is $80,000 means $70,000 is sitting idle. That money should be working.
The simple solution: open a high-yield savings account or money market account and transfer anything above your floor into it. You're still liquid. The money is still accessible. But it's earning something while it waits.
This is one of the simplest, lowest-effort ways to improve your business's financial position without changing anything about how you operate.
Take a quick look at where you stand:
Do you know your current monthly operating expense total? Do you know what your loan principal payments are each month? Do you have a specific cash floor target for your business? Does your checking account balance drop below a comfortable level at certain times of year? Are you keeping more cash than necessary in a non-interest-bearing account?
If you can't answer the first three with real numbers, or if the last two describe you, a cash reserve framework is worth building. It doesn't require a complex system. Just clear numbers and a consistent habit.
A static cash balance isn't just about protecting yourself from emergencies. It changes how you operate.
When you know your floor is covered, you can make decisions without panic. You can wait out a slow-paying client without scrambling. You can take advantage of an opportunity without wondering if you can afford it. You can say no to bad work because you're not desperate.
Cash is what gives a small business options. Most businesses don't fail because they're unprofitable. They fail because they run out of cash at the wrong moment.
Sixty to ninety days of reserves changes that equation significantly.
Set a cash floor. Calculate it using your full picture: operating expenses, inventory, and loan payments. Keep that amount in your business checking at all times. Move anything above it somewhere it can earn.
It's a simple framework. But having it in place, and actually maintaining it, is one of the most stabilizing things you can do for your business.