Interest rates generally move in the same direction as inflation. And with inflation creeping up over the past year or so, interest rates being offered by banks have jumped up too.
If you have excess money sitting in your practice bank accounts, please take a few minutes to set up a companion savings account and transfer any money not needed for working capital into that account. You should be able to earn 4% or more on those funds previously earning no interest. That equates to $4k of interest on every $100k transferred into an interest-bearing account.
For working capital, we generally recommend that our clients keep just one to two months of expenses on hand. Expenses include your “non-doctor” overhead costs, the salaries and benefits paid to your associates, the salaries and benefits paid to you and your family members, loan payments, and money needed to invest back into the practice within the next year or so to purchase equipment or improve the facility.
Another option is to take distributions from your practice and personally invest those funds into a savings account. Personal savings accounts generally pay a higher interest rate than what banks offer for accounts owned by businesses. Please be aware that there might be a tax pitfall when taking distributions from newer practices. As long as you have owned the practice for a while and the bulk of the practice loans have been paid off, you should be able to take distributions from the practice and personally invest those funds into a high-yield savings account, certificate of deposits, or money market accounts without triggering a tax on “distributions in excess of basis”.
Your Client Manager can help you figure out the minimum bank balance to maintain in your practice for working capital and how much is available in your practice bank accounts to take out personally.