Cash Buffer Calculator — The Finance Library

Interactive Tool

How Much Cash Should You Keep in Reserve?

Too little cash is reckless. Too much is hoarding capital that could be working harder. This tool helps you find the right buffer for your business — and tells you where you stand today.

The Goldilocks cash problem

Why "keep as much as possible" is the wrong answer

Every business needs a cash buffer — a reserve held in liquid form to cover operating expenses when revenue dips, clients pay late, or unexpected costs hit. But there is a tension at the heart of this decision: cash sitting idle has an opportunity cost. It is capital that could be invested in growth, equipment, talent, or paying down expensive debt.

The right buffer is not the same for every business. It depends on your monthly burn rate (what it costs to keep the lights on), the predictability of your revenue, how concentrated your customer base is, and whether you have access to credit as a backstop.

Too Little

Vulnerable to shocks. One bad month can threaten operations.

Right Size

Covers near-term risk without immobilizing growth capital.

Too Much

Idle capital — a missed opportunity to invest or reduce debt.

Your cash position — relative to recommended buffer

Enter your figures to see your position

A commonly cited starting point for small businesses is 3–6 months of operating expenses as a cash reserve — this is an illustrative benchmark that varies by industry, business model, and risk profile. More volatile businesses, or those with few alternative financing options, should sit toward the higher end. Stable, recurring-revenue businesses with good credit access can sit lower.

This tool calculates an operating cash buffer — the reserve needed to sustain the business in the near term. It does not account for strategic cash reserves for acquisitions, equipment purchases, or other planned capital deployment. Speak with your accountant or Finance advisor to determine the full picture for your business.

Cash Buffer Calculator

Based on your burn rate and risk profile

For educational and illustrative purposes only. All inputs and outputs are your responsibility. Recommended buffer ranges are based on commonly cited illustrative benchmarks — they vary significantly by industry, business model, access to credit, and individual circumstances. This tool does not constitute financial advice. Consult your accountant, CFO, or financial advisor before making cash management decisions.

Monthly Fixed Costs

Rent / Lease

Office, warehouse, retail space, or equipment leases.

Payroll (fixed salaries)

Salaried employees only. Variable / commission-based pay goes in variable costs below.

Loan / Debt Repayments

Monthly principal and interest on business loans, credit facilities, or equipment finance.

Insurance & Licenses

Business insurance, professional indemnity, regulatory licenses. Use monthly equivalent.

Software & Subscriptions

SaaS tools, platforms, and recurring technology costs per month.

Other Fixed Costs

Utilities, accountancy retainer, marketing retainer, or any other fixed monthly commitment.

Monthly Variable Costs (at current revenue run-rate)

Cost of Goods Sold / Delivery

Materials, production costs, or direct service delivery costs per month at current volume.

Variable Labor & Commissions

Hourly staff, freelancers, contractors, and sales commissions that vary with revenue.

Other Variable Costs

Packaging, shipping, payment processing fees, or any other cost that scales with activity.

Current Cash Position

Cash in Bank (liquid)

Cash and short-term deposits you can access immediately. Exclude money already committed to upcoming bills or payroll.

Monthly Revenue (current)

Your average monthly revenue over the last 3 months. Used to calculate net burn rate.

Risk Profile — shapes your recommended buffer

How predictable is your monthly revenue?

Recurring subscriptions and long-term contracts are more predictable than project or transaction-based revenue.

How concentrated is your customer base?

If one customer represents more than 20–25% of revenue, their loss would be a significant shock.

Do you have access to a credit facility or line of credit?

Businesses with reliable access to credit can maintain a lower cash buffer since they have a backstop available.

What is your typical customer payment cycle?

Longer payment terms mean more working capital tied up in receivables — this increases the buffer needed.

Results

Total Fixed Costs (monthly) —

Total Variable Costs (monthly) —

Monthly Cash Burn (total operating costs) —

Net Monthly Burn (burn minus revenue) —

Recommended Cash Buffer Range

Minimum Buffer

—

— months of burn

Target Buffer

—

— months of burn

Your Current Cash —

Gap to Minimum Buffer —

Gap to Target Buffer —

Cash Runway

—

months at current burn

Buffer Multiple

—

cash vs monthly burn

Fixed Cost Ratio

—

fixed as % of total burn

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How Much Cash Should You Keep in Reserve?

Cash Buffer Calculator

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How Much Cash Should You Keep in Reserve?

Cash Buffer Calculator

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