06/07/2013 10:08 am ET Updated Aug 07, 2013

You've Got Cash! Where to Put It?

Shh. Don't tell anyone. But... holy smokes... you've got cash!

Sure, the past few years have been tough. You worked hard. You had to cut expenses and payroll. You managed your projects with skill. You paid attention to details. And now you look at your bank statement and see the results: more money sitting in your account than you need. But for God's sake, don't tell anyone! This is 2013. Profits are evil. Businesses run by the rich and wealthy people like you are bad. Don't you know that U.S. companies are hoarding their cash and that this is likely the cause of our slow economy, high unemployment and global warming? You don't want to be accused of contributing to these problems, do you? If people find out you have excess cash because you're a good business person you may be made to feel guilty.

What's the right amount of money to keep in your business? Like anything else there are different opinions. But a safe number is to keep enough cash on hand to cover at least two months overhead. As an extra safety net, be sure (if you're able) to have a line of credit available from your bank. Yes, you'll have to pay an annual fee but it's pretty nominal. The line can be your added cushion if you miscalculate your cash reserves. And at current interest rates on business lines are historically low -- around 5 percent.

So what do you with the rest? You can't put it under a mattress and you can't just leave it all there. Or can you? I have many clients who face this issue. These are hard-working business owners that have prospered even in these difficult times and have quietly accumulated some dough. What do they do with their excess cash? Here are a few real life examples from clients of mine, with their names changed to protect me from getting yelled at.

Patty looks at it. Yes, that's right. She looks at it. She leaves it in her design business. She has a checking account and she transfers extra cash into her business money market account. She doesn't care that it's earning next to nothing (less than 1 percent annual interest). She just likes to know that it's there. It gives her comfort and confidence. And the fact that it's earning something is better than earning nothing. This is conservative. Safe. Boring. But understandable -- she's accumulated this wealth over the years and she's not a huge risk taker. For some, this is a completely understandable option. Patty sleeps soundly at night.

Alan pulls it out. He leaves only what he needs in his landscaping business and distributes the rest to himself. Other business owners I know loan the money to themselves or issue dividends -- it depends on your organization, so run this decision by your accountant. Why does Alan take the cash out of his business? For starters, he's uncomfortable leaving too much cash that would be included as part of his corporate assets if there's any incident that could potentially turn into a company liability. Secondly, Alan likes to give himself the feeling of being lean and mean. To him, if the cash is out of sight, then it's out of mind. Because it's been removed from the business (and invested in a personal account) he can believe it's no longer there. That keeps him in the mindset of a hungry entrepreneur. Silly? For him, it works.

Jeffrey buys inventory. He has a decent sized warehouse for the automotive parts that his company sells and is always looking for deals. He's not afraid to do a little travelling too if that's what it takes. And cash puts him in a strong buying position. He can approach his vendors and make aggressive offers for larger amounts of inventory while dangling real money in front of their noses. He looks for used parts and distressed businesses and swoops in for the kill. He can negotiate bigger discounts this way. He has the room to store the stuff. His attitude is that he can achieve a much greater return on his money by relying on his own buying and selling instincts rather than sticking it in a low paying interest bearing account.

Laura shares the wealth. Her car service firm now employs more than 20 people. And, like most business owners, her people are the most important part of her business. She doesn't plan to give anyone equity in her company. But she still wants her people to benefit from her company's success. Twice a year, if the cash is there she gives bonuses. Because she's so small, there's no formal plan. It's based on what she can afford, the level and experience of the person, and their value to the company. One of the bonuses is straight cash. The other one is a contribution to that employee's 401(K) retirement plan. Her employees love her for this. It keeps them from leaving and it ties them to closer to her company's performance. Laura has to be careful though: oftentimes employees come to expect these amounts as part of their annual compensation. So she has to remind them every year that the amount and frequency of these bonuses are strictly dependent on the success of the company.

Jennifer buys other businesses. She's an accountant and took over her dad's firm a decade ago. Since then she's acquired the practices of three other accountants and she's always on the hunt for more. The population is getting older and more and more people are looking to sell out. Jennifer isn't a marketing person and doesn't like to take gambles on direct mails or mass email campaigns to try and drum up new business. She'd rather acquire existing clients from an established firm where she can get introduced and achieve an immediate foothold. To her, that's the best way for growing her business. So she spends her cash to buy them. The more cash she accumulates, the stronger her buying position can be because she needs less debt. The way she looks at it, she could buy shares in a publicly held company like Apple or General Electric, but that's like giving her money away for other people to use to grow their businesses. She'd rather use it to grow her own.

So do you have excess cash It's okay, you can tell me. I won't tell anyone else. You don't want this kind of info getting around particularly in these challenging political times. People don't like to admit success nowadays and I completely understand. Hopefully if you've managed to accumulate a few extra bucks over the past years, you'll find a good use of it. The most important thing I've learned from the five business people above is this: You have a better chance of growing your own money faster than any financial planner.