Skip to content
  • XERO Sign In
  • Client Sign In
    • Suralink Client Portal
    • eMoney Login
    • Black Diamond Login
  • Facebook
  • LinkedIn
  • Youtube
  • About
    • History
    • Our Team
  • Services
    • New Doctors
    • Financial Planning
    • Practice Transitions
    • Investments
    • Accounting Services
    • Tax Services
    • New Clients
    • Book a CWA Speaker
  • Resources
    • Resources
    • Podcast
    • Annual Meeting
    • Events
    • 3to1 Foundation
  • Blog
  • Contact
  • XERO Sign In
  • Client Sign In
    • Suralink Client Portal
    • eMoney Login
    • Black Diamond Login
  • Facebook
  • LinkedIn
  • Youtube
  • Careers
  • References
  • Privacy
  • Disclosures
  • Terms of Use
  • Events
  • About
    • History
    • Our Team
  • Services
    • New Doctors
    • Financial Planning
    • Practice Transitions
    • Investments
    • Accounting Services
    • Tax Services
    • New Clients
    • Book a CWA Speaker
  • Resources
    • Resources
    • Podcast
    • Annual Meeting
    • Events
    • 3to1 Foundation
  • Blog
  • Contact

Ask a CPA: What’s the right amount of liquidity?

  • by CWA
  • •    January 3, 2019
SHARE

In a recent episode of The Dentalpreneur Podcast, host Dr. Mark Costes took the opportunity to bounce a slew of money related questions off of episode guest and CWA Partner Judson Crawford. In the episode they tackled student loans, life insurance, 529s, asset depreciation and one topic Judson says his clients bring up all the time—the right amount of liquidity.

Having cash on hand in case of emergencies is important. In fact, having liquidity in your portfolio is part of a well-planned, diversified investment approach—but how much is enough? And when is it too much?

When we sit down with clients, one of the first things we will look at is, from the personal side, the length of the wait period on the person’s disability insurance. Many people, should they become disabled, have a 90-day wait period before disability takes effect. For that fact, we usually advise clients to have at least 90 days of cash set aside in a money market fund that can be accessed at any time as an “emergency fund.”

On the practice side the amount is less definitive, mainly because each client has a different level of comfort with risk at different points in their career. A healthy range would be somewhere between 1.5- 2 times one month’s expenses in the business account. This amount would be something to use to pay things like staff salaries, supplies, rent—essentially, what you must keep paying in order to keep your practice running.

This amount, in addition to the probable one month outstanding in accounts receivable, is going to give owners at least three months in the practice before exhausting funds.

If you can meet those minimums and start to accumulate overage, it is a good idea to create a plan to allocate those amounts to things like have extra savings, pay down debt or other personal goals.

Do you have a financial question you’d like one of our CPAs to weigh in on? Submit your question below (anonymously) and each month we will feature a new question—answered by one of our financial planners.

Click here to listen to the full Dentalpreneur Podcast episode featuring Judson Crawford.

 

Want a more personal answer to your tough questions? Contact us at cainwatters.com/contact.

 

Cain Watters is a Registered Investment Advisor.  Cain Watters only conducts business in states where it is properly registered or is excluded from registration requirements. Registration is not an endorsement of the firm by securities regulators and does not mean the adviser has achieved a specific level of skill or ability.  Request Form ADV Part 2A for a complete description of Cain Watters investment advisory services. Diversification does not ensure a profit and may not protect against loss in declining markets.  Past performance is not an indicator of future results. 

LIKE THIS ARTICLE? HERE ARE OTHERS YOU MIGHT LIKE.

Your Investment Portfolio and Dental Practice Can Thrive in 2023

January 6, 2023

Ensure Your End-Of-Year Charitable Giving is Tax Deductible

November 25, 2022

Claim Inflation Reduction Act Credits on Your Tax Return

November 18, 2022

The Best Way to Structure Employee Bonuses

October 5, 2022
GET THE LATEST NEWS AND INFORMATION IMPACTING YOUR PRACTICE.
Email will be used in accordance with our Privacy Policy

CATEGORIES

All
Categories
  • Accounting (7)
  • Accumulating Wealth Podcast (69)
  • Annual Meeting (14)
  • Digital News Feature (104)
  • Financial Planning (121)
  • Inside CWA (27)
  • Investing (57)
  • Knowledge & Know-How (74)
  • News (79)
  • PR/Marketing/Social Media (5)
  • Practice Management (80)
  • Practice Transition (1)
  • Seminars & Events (11)
  • Tax News (82)
  • Technology (5)
  • The 3to1 Foundation (12)
  • The Advisors' Shelf (11)
  • Videos (30)

TOP POSTS

Employee Retention Tax Credit Retroactive Credits for Dental Practices

September 16, 2022

Roth or Pre-Tax? Select the Best Savings Strategy for You

April 18, 2022

IRS Funding Limits for 2022

January 14, 2022

Regaining Control of Dental Practice Salaries

July 9, 2021

Employee Retention Tax Credit Retroactive Credits for Dental Practices

September 16, 2022

Roth or Pre-Tax? Select the Best Savings Strategy for You

April 18, 2022

IRS Funding Limits for 2022

January 14, 2022

Regaining Control of Dental Practice Salaries

July 9, 2021
CONNECT WITH US
  • About
    • History
    • Our Team
  • Services
    • New Doctors
    • Financial Planning
    • Practice Transitions
    • Investments
    • Accounting Services
    • Tax Services
    • New Clients
    • Book a CWA Speaker
  • Resources
    • Resources
    • Podcast
    • Annual Meeting
    • Events
    • 3to1 Foundation
  • Blog
  • Contact
  • Careers
  • References
  • Privacy
  • Disclosures
  • Terms of Use
  • Events
Cain Watters & Associates 6900 Dallas Parkway, Suite 500 Plano, Texas 75024