How much cash should a consulting firm keep?

A consulting firm sells time and expertise. It pays consultants twice a month, and clients pay invoices on 30 to 60 day terms. Large clients can take longer. The firm's cash problem is the gap between the work and the payment.

Payroll per run, all-in $ How often you run payroll Fixed bills per month (rent, loans, insurance, software) $ Days your customers take to pay, on average days Cash in the bank today $

Minimum to keep

Two payroll runs plus one month of fixed bills

Comfortable level

Covers costs while you wait for customers to pay, plus one month

Weeks your cash covers

If no customer paid you

The starting numbers are an example. Replace them with yours.

How cash moves in a consulting firm

Most of the cost is people, and they are paid before the client pays.
Large corporate clients often set their own payment terms.
Project work billed at milestones can come weeks after the work.
Subcontractors may need to be paid faster than the client pays you.

Why the usual rule falls short

Two consulting firms each bill $75,000 a month. One bills monthly retainers in advance. The other bills milestones on 60-day terms. The second carries two to three months of consultant pay before it sees the money.

How the calculator works

Result	Formula
Minimum to keep	2 × payroll per run + 1 month of fixed bills
Comfortable level	Monthly costs × (days to collect ÷ 30 + 1)
Weeks your cash covers	Cash ÷ weekly costs

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Also for consulting firm owners, see the consulting firm monthly financial report.