Comments on: How do you handle your cash reserves?

By: Russ Gartner

Russ Gartner — Mon, 16 Dec 2019 20:21:22 +0000

This concept is how I originally stumbled upon (as my team refers to you) “The Wizard of Berkus”! When a person queries short term vs long term capital you are still the only reference that appropriately addresses this seemingly complex issue that kills small business owners, especially in the critical startup and early growth stage. Lines of credit and customer deposits are harbingers of bankruptcy if used for long term assets that are not capitalized appropriately. I can tell you all from personal experience that not wanting to pay term interest, speculated success/profits, ignorance to cash flow, or inability to justify the purchase of long term assets to your banker are all invalid reasons to cross the line between eating up your (cash) resources and gaining a strategic asset. Thanks again Mr Berkus for publishing this valuable information!

By: Dave Berkus

Dave Berkus — Tue, 10 Dec 2019 18:08:25 +0000

In reply to William Slattery.

Bill,
You are right that tax is paid on income whether on a cash or accrual bases. So reserves are taxed when earned. But when later spent, the opposite effect offsets the earlier tax as business expenditures are made with that money…

By: Rennie Gabriel

Rennie Gabriel — Tue, 10 Dec 2019 18:04:16 +0000

Hi Dave, I love this. Such simple, real world advice, not only for business owners, but EVERYONE. While I have been teaching the same thing for decades, it is even stronger when it comes from and investor of your stature.

By: William Slattery

William Slattery — Tue, 10 Dec 2019 17:40:33 +0000

Dave as always thanks you for a great article. I like the idea of cash reserves but I’ve been told I have to pay taxes in order to retain that money in a C corporation. What are the tax consequences of keeping two months cash reserves and is there someway to avoid paying taxes on this to retain the money within the corporation