How much cash should your business keep?
Most advice says three to six months of expenses. Your payroll and how fast customers pay you give a better answer. Enter five numbers.
How the calculator works
| Result | Formula | Why |
|---|---|---|
| Minimum to keep | 2 × payroll per run + 1 month of fixed bills | Payroll and fixed bills are the payments you cannot miss |
| Comfortable level | Monthly costs × (days to collect ÷ 30 + 1) | You pay staff before customers pay you. This covers that gap plus one month. |
| Weeks your cash covers | Cash ÷ weekly costs | How long you could run if no customer paid you |
These rules come from a CFO's judgment, not from a survey. They fit service businesses that pay staff on a schedule and invoice customers. A business that holds a lot of stock needs more.
Why the usual rule falls short
"Three to six months of expenses" treats every business the same. Two companies with the same costs can need very different amounts of cash.
Take two cleaning companies, each with $80,000 of monthly costs. One bills homeowners by card on the day of the clean. The other bills offices and waits 45 days. The second one carries a month and a half of payroll for its customers before any of it comes back. It needs far more cash, even though the profit looks the same.
What the number does not tell you
A reserve is a snapshot. It does not show the week your cash will run lowest. That depends on when payroll lands, when the big customers pay, and when the quarterly bills hit. A 13-week cash forecast shows that week ahead of time.
Common questions
How much cash should a small business keep in the bank?
At least two payroll runs plus one month of fixed bills. A comfortable level covers your costs for as long as customers take to pay you, plus one more month. The calculator above works out both from your own numbers.
Why not use three to six months of expenses?
That rule ignores how your business actually moves money. A company paid upfront needs less. A company that pays staff weekly and waits 45 days for customers needs more. Your payroll and your collection time give a better answer than a rule of thumb.
What counts as a fixed bill?
Anything you pay every month whether or not you have work. Rent, loan payments, insurance, software, vehicle leases. Leave out costs that rise and fall with sales.
What if I am below the minimum?
Start with what customers owe you. Collecting faster is usually the quickest way to raise cash. A line of credit helps too, but only if you set it up before you need it.
By industry
Cleaning · Pool service · Pest control
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