Theres no doubt that every business needs to keep enough cash in its checking account (or on hand in currency and coin for cash-based businesses such as grocery stores and gambling casinos). But precisely how much? Every business manager would worry if cash were too low to meet the next payroll. Some liabilities can be put off for days or even weeks, but employees have to be paid on time. Beyond a minimum, rockbottom cash balance amount to meet the payroll and to provide at least a bare-bones margin of safety, it is not clear how much additional cash balance a business should carry, just as some people may have only $5 or $10 in walking-around money and others could reach in their wallet and pull out $500. Continue reading…
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