- Days Cash on Hand


By PATH by Simplex Support Team

updated 4 months ago

Create Data Mash Calculation with this Formula:

(Total Bank Accounts / (( Total Expenses - Depreciation - Amortization ) / 365))


Days cash on hand is the number of days that an organization can continue to pay its operating expenses, given the amount of cash available. Managers should be aware of the days cash on hand in the following circumstances:

  • When a business is starting up and is not yet generating any cash from sales.
  • During the low part of a seasonal sales cycle, when there may be no sales.
  • During a transition to a new product line, when sales of the old product line are poor and declining.

A key assumption in determining days cash on hand is that there is no cash flow from sales; instead, there are just operating expenses, such as salaries, rent, and utilities. To determine the amount of these operating expenses, use the operating expenses subtotal in the income statement, and subtract all non-cash expenses (usually depreciation and amortization). Then divide by 365 to determine the amount of cash outflow per day. Finally, divide the cash outflow per day into the total amount of cash on hand.


Tip: What should a business have?

At a minimum, you should have 45 days cash on hand, but an optimal amount is between 3-6 months worth of operating expenses. This way you can weather unexpected events like COVID or natural disasters. Any more than 6 months, you should be building a reserve for a big purchase.

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