Explore our services
  • Wealth Planning
    Receive a multigenerational wealth plan with personalized strategies and guidance.
  • Investing
    Experience a holistic approach to investing, centered on your goals and priorities.
  • Lending
    Unlock liquidity with a variety of customized lending products, strategies and solutions.
  • Banking
    Access a variety of banking products and services tailored to your needs.
  • Family wealth platform
    Explore our platform of specialized services designed for ultra-high-net-worth clients.

Learn about us

Discover our approach, digital tools and community initiatives 

Key takeaways

  • Managing cash effectively is a critical part of running a successful business.
  • Many businesses experience seasonal fluctuations in sales and expenses, and it’s important to plan ahead for slower periods.
  • An array of financial instruments let you earn returns on the excess money generated by your business.

Contributors

Mary Mannion

Senior Associate, J.P. Morgan Wealth Management

 

No matter the size of your company or the industry you’re working in, managing cash is a key ingredient in running a successful business. Beyond ensuring that you have enough money to cover your costs and fund your operations, cash management can play an essential role in growing your company and setting you up for a successful future.

In this article, we’ll explore the basics of business cash management, including how you can navigate through slower business seasons as well as help maximize your yields to make the most of the cash generated by your business.

Why is cash management important?

Simply put, cash management means overseeing the money coming in and out of your business, making sure that you have enough funds to cover your costs, weather financial uncertainties and capitalize on new investment opportunities. In other words, effectively managing cash allows you to enhance the liquidity of your business and optimize your profitability.

The process of tracking the cash that’s entering and exiting your business typically takes the form of a cash flow statement. As the name suggests, cash flow represents the amount of money flowing into and out of your business over a given time period.

The items you include in your cash flow statement may vary based on the type of business you run, but monitoring your cash flow is always critical because, even if you’re turning a profit, you’ll run into problems if you don’t have cash available when you need it.1

Preparing for cash seasonality

Every business is unique, and effective cash management involves plenty of moving parts. But one common challenge faced by many businesses is that sales tend to be seasonal and slow down during certain parts of the year. For example, an ice cream shop will probably pull in higher revenue over the summer, while fewer customers will be in the mood for a frozen treat during the depths of winter.

While an ice cream parlor may be an extreme case, many companies see fluctuations in cash flow due to seasonal variations in sales, expenses or market conditions. To prepare for slower business seasons, it’s essential to analyze historical cash flow data and identify patterns. By understanding when cash inflows and outflows are likely to peak or dip, businesses can adjust their cash strategies accordingly.

During peak seasons, you may want to set aside extra cash to use during slower periods. Creating a cash reserve or establishing a line of credit can provide a financial cushion to cover operational expenses when cash flow is low. Keeping a close eye on your cash flow projections and adjusting your budget can also help you adapt to shifting market conditions.2

Earning yield on excess cash

Once you’ve prepped your cash flow statement and set aside the funds to cover your operating costs and account for any potential slow season, the question becomes what to do with excess cash. Fortunately, the extra money generated by your business doesn’t have to sit idly – consider putting that cash to work for you by placing it in high-yielding financial instruments.

The best place to stash your business cash often depends on your liquidity requirements, or how soon you might need to access the money. Short-term investments like money market accounts, certificates of deposit or short-term bonds may offer higher returns than traditional savings accounts without sacrificing too much liquidity, allowing you to earn attractive returns on idle cash.

If you’re able to sock away your business cash for a more significant stretch, you might consider longer-term investments like Treasury bonds, corporate bonds or mutual funds. Since these investments may have longer maturity periods, they may tie up cash for a longer duration.

Another potential option for what to do with your excess cash is to consider liability driven investing, which is an investing strategy that can help generate income to help pay off future expenses. Liability driven investing can be especially helpful to business owners because it can help to mitigate risks associated with keeping cash on hand while also potentially growing returns to cover payment obligations.

And, generally speaking, diversifying investments across different asset classes and maturities can help mitigate risks and optimize returns.

Bottom line

Cash management is vital to keep your business thriving and to navigate through seasonal fluctuations. By preparing for seasonal cash flow cycles and maximizing yields through strategic investments, you can ensure financial stability and make the most of your business cash assets.

The key to successful cash management is to plan ahead and stay agile so that you can respond to changes. Accountants and other financial professionals can help you develop an optimal cash allocation strategy for your business.

Frequently asked questions

How should cash be managed in a business?

Effective cash management is an essential part of a successful business plan. This means forecasting the flows of money in and out of your business and planning accordingly.

What should I do with excess business cash?

Rather than letting cash sit idly, consider stashing your extra funds in financial products that can generate attractive returns. Some options to consider include certificates of deposit, money market accounts and different types of bonds. The ideal cash strategy for your business depends largely on how soon you might need to access the money.

What is cash seasonality?

Many businesses experience stronger sales in certain parts of the year, while other periods are slower. Part of a successful cash management plan involves anticipating and preparing for the seasons when your sales will be sluggish.

References

1.

U.S. Small Business Administration, “How to understand cash flow statements.”

2.

U.S. Small Business Administration, “The pros and cons of running a seasonal business.” (June 8, 2016)

Connect with a Wealth Advisor

Our Wealth Advisors begin by getting to know you personally. To get started, tell us about your needs and we’ll reach out to you.

Connect now

IMPORTANT INFORMATION

This material is for informational purposes only, and may inform you of certain products and services offered by J.P. Morgan’s wealth management businesses, part of JPMorgan Chase & Co. (“JPM”). Products and services described, as well as associated fees, charges and interest rates, are subject to change in accordance with the applicable account agreements and may differ among geographic locations. Not all products and services are offered at all locations. If you are a person with a disability and need additional support accessing this material, please contact your J.P. Morgan team or email us at accessibility.support@jpmorgan.com for assistance. Please read all Important Information.


GENERAL RISKS & CONSIDERATIONS. Any views, strategies or products discussed in this material may not be appropriate for all individuals and are subject to risks. Investors may get back less than they invested, and past performance is not a reliable indicator of future results. Asset allocation/diversification does not guarantee a profit or protect against loss. Nothing in this material should be relied upon in isolation for the purpose of making an investment decision. You are urged to consider carefully whether the services, products, asset classes (e.g. equities, fixed income, alternative investments, commodities, etc.) or strategies discussed are suitable to your needs. You must also consider the objectives, risks, charges, and expenses associated with an investment service, product or strategy prior to making an investment decision. For this and more complete information, including discussion of your goals/situation, contact your J.P. Morgan representative.

NON-RELIANCE. Certain information contained in this material is believed to be reliable; however, JPM does not represent or warrant its accuracy, reliability or completeness, or accept any liability for any loss or damage (whether direct or indirect) arising out of the use of all or any part of this material. No representation or warranty should be made with regard to any computations, graphs, tables, diagrams or commentary in this material, which are provided for illustration/reference purposes only. The views, opinions, estimates and strategies expressed in this material constitute our judgment based on current market conditions and are subject to change without notice. JPM assumes no duty to update any information in this material in the event that such information changes. Views, opinions, estimates and strategies expressed herein may differ from those expressed by other areas of JPM, views expressed for other purposes or in other contexts, and this material should not be regarded as a research report. Any projected results and risks are based solely on hypothetical examples cited, and actual results and risks will vary depending on specific circumstances. Forward-looking statements should not be considered as guarantees or predictions of future events.

Nothing in this document shall be construed as giving rise to any duty of care owed to, or advisory relationship with, you or any third party. Nothing in this document shall be regarded as an offer, solicitation, recommendation or advice (whether financial, accounting, legal, tax or other) given by J.P. Morgan and/or its officers or employees, irrespective of whether or not such communication was given at your request. J.P. Morgan and its affiliates and employees do not provide tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors before engaging in any financial transactions.

Legal Entity and Regulatory Information.

J.P. Morgan Wealth Management is a business of JPMorgan Chase & Co., which offers investment products and services through J.P. Morgan Securities LLC (JPMS), a registered broker-dealer and investment adviser, member FINRA and SIPC. Insurance products are made available through Chase Insurance Agency, Inc. (CIA), a licensed insurance agency, doing business as Chase Insurance Agency Services, Inc. in Florida. Certain custody and other services are provided by JPMorgan Chase Bank, N.A. (JPMCB). JPMS, CIA and JPMCB are affiliated companies under the common control of JPMorgan Chase & Co. Products not available in all states.

Bank deposit accounts and related services, such as checking, savings and bank lending, are offered by JPMorgan Chase Bank, N.A. Member FDIC.

This document may provide information about the brokerage and investment advisory services provided by J.P. Morgan Securities LLC (“JPMS”). The agreements entered into with JPMS, and corresponding disclosures provided with respect to the different products and services provided by JPMS (including our Form ADV disclosure brochure, if and when applicable), contain important information about the capacity in which we will be acting. You should read them all carefully. We encourage clients to speak to their JPMS representative regarding the nature of the products and services and to ask any questions they may have about the difference between brokerage and investment advisory services, including the obligation to disclose conflicts of interests and to act in the best interests of our clients.

J.P. Morgan may hold a position for itself or our other clients which may not be consistent with the information, opinions, estimates, investment strategies or views expressed in this document.  JPMorgan Chase & Co. or its affiliates may hold a position or act as market maker in the financial instruments of any issuer discussed herein or act as an underwriter, placement agent, advisor or lender to such issuer.

Business

Incentive stock options and the AMT

Dec 19, 2024

Incentive stock options can provide tax benefits, but without proper planning, those benefits can be diminished.

Read more
1016772350

Business

Understanding business entities

Dec 05, 2024

If you have a business or are thinking about starting one, you’ll have to decide how you want to structure it. Your answer may differ depending on your particular goals – like asset protection, tax efficiency, or ease of transitioning your business to family members.

Read more
2 men in an office speaking banner

Business

Creating a cash runway for your startup

Dec 03, 2024

Strong cash management is essential for any business. For startups, achieving an adequate cash runway is critical to survival.

Read more
people in a meeting banner

Business

Developing a change management framework for treasury

Nov 22, 2024

To effectively support the enterprise in a rapidly shifting business landscape, treasury must adopt a cohesive change management framework. Here’s how.

Read more
2 people looking at laptop banner

Business

Treasury’s role in building a ‘culture of resiliency’

Nov 18, 2024

Global challenges and uncertainties are hitting businesses faster and harder than ever before. Treasury must deliver quick, decisive responses that build resilience to these risks.

Read more
Bernard Williams banner

1:16 - Business

Building a great business leader: Why mentorship matters

Oct 25, 2024

Learn from diverse business owners about why great mentors are behind every great business leader.

Watch video
Washing machines in a public laundromat

Business

Considerations for owning a cash-only business

Sep 27, 2024

Cash-only business such as laundromats and carwashes can be lucrative opportunities for investors. Here’s what to know about running one.

Read more

Business

Business succession planning: Valuing your business

Sep 12, 2024

Understand the basics of business valuation and how it can help you make better-informed decisions as your company grows and you get closer to succession.

Read more

Check the background of our firm and investment professionals on FINRA's BrokerCheck

To learn more about J. P. Morgan’s investment business, including our accounts, products and services, as well as our relationship with you, please review our J.P. Morgan Securities LLC Form CRS and Guide to Investment Services and Brokerage Products.

This website is for informational purposes only, and not an offer, recommendation or solicitation of any product, strategy service or transaction. Any views, strategies or products discussed on this site may not be appropriate or suitable for all individuals and are subject to risks. Prior to making any investment or financial decisions, an investor should seek individualized advice from a personal financial, legal, tax and other professional advisors that take into account all of the particular facts and circumstances of an investor's own situation. 

This website provides information about the brokerage and investment advisory services provided by J.P. Morgan Securities LLC ("JPMS"). When JPMS acts as a broker-dealer, a client's relationship with us and our duties to the client will be different in some important ways than a client's relationship with us and our duties to the client when we are acting as an investment advisor. A client should carefully read the agreements and disclosures received (including our Form ADV disclosure brochure, if and when applicable) in connection with our provision of services for important information about the capacity in which we will be acting.

INVESTMENT AND INSURANCE PRODUCTS ARE: • NOT FDIC INSURED • NOT INSURED BY ANY FEDERAL GOVERNMENT AGENCY • NOT A DEPOSIT OR OTHER OBLIGATION OF, OR GUARANTEED BY, JPMORGAN CHASE BANK, N.A. OR ANY OF ITS AFFILIATES • SUBJECT TO INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF THE PRINCIPAL AMOUNT INVESTED

J.P. Morgan Wealth Management is a business of JPMorgan Chase & Co., which offers investment products and services through J.P. Morgan Securities LLC (JPMS), a registered broker-dealer and investment adviser, member FINRA and SIPC Insurance products are made available through Chase Insurance Agency, Inc. (CIA), a licensed insurance agency, doing business as Chase Insurance Agency Services, Inc. in Florida. Certain custody and other services are provided by JPMorgan Chase Bank, N.A. (JPMCB). JPMS, CIA and JPMCB are affiliated companies under the common control of JPMorgan Chase & Co. Products not available in all states.

Please read additional Important Information in conjunction with these pages.