{"id":1192,"date":"2026-10-21T20:36:36","date_gmt":"2026-10-21T20:36:36","guid":{"rendered":"https:\/\/www.orama.ai\/?p=1192"},"modified":"2026-10-21T20:36:38","modified_gmt":"2026-10-21T20:36:38","slug":"days-of-cash-on-hand","status":"publish","type":"post","link":"https:\/\/www.orama.ai\/en\/academy-tesoreria\/days-of-cash-on-hand\/","title":{"rendered":"How many days of cash does my business have?"},"content":{"rendered":"<p><strong>Days of cash (also called days cash on hand) is the number of days your business could keep paying its expenses with the money it has in the bank today if it collected nothing more.<\/strong> You calculate it by dividing your available balance by your average daily spend: with \u20ac260,000 in the bank and \u20ac11,000 of payments a day, you have about 23 days of cash.<\/p>\n<p>It is a cushion indicator: it tells you how long you would last if collections stopped. It does not tell you when you will run out of cash, which is what runway measures. Below you will find the formula, a worked example, some rough thresholds and how to improve the result.<\/p>\n<h2>The days of cash formula<\/h2>\n<p><strong>Days of cash = available balance \u00f7 (payments over the last 3 months \u00f7 90)<\/strong><\/p>\n<ul>\n<li><strong>Available balance:<\/strong> the total you have today in your current accounts. Do not include the unused limit on your credit lines: it is borrowed money and is best looked at separately.<\/li>\n<li><strong>Average daily spend:<\/strong> everything that has left your accounts over the last three months (suppliers, payroll, social security, taxes, rent, loan instalments), divided by 90. Using three months smooths out a month with extra pay or a quarterly VAT payment.<\/li>\n<li><strong>What to leave out:<\/strong> one-off payments that will not recur, such as buying a van or repaying a loan early. If you include them, your daily spend looks inflated and your days of cash lower than they really are.<\/li>\n<\/ul>\n<p>If you also want to know how long you would last counting your financing, calculate <strong>days of cash including credit<\/strong> separately: add the undrawn limit of your credit lines to the balance.<\/p>\n<h2>Example: a distributor with \u20ac4M in revenue<\/h2>\n<p>Imagine a fictitious company, Northern Foods, a food distributor with \u20ac4M in annual revenue, two banks and a \u20ac150,000 credit line, of which \u20ac50,000 is drawn.<\/p>\n<table>\n<thead>\n<tr>\n<th>Item<\/th>\n<th>Amount<\/th>\n<\/tr>\n<\/thead>\n<tbody>\n<tr>\n<td>Current account balance today<\/td>\n<td>\u20ac260,000<\/td>\n<\/tr>\n<tr>\n<td>Payments over the last 3 months<\/td>\n<td>\u20ac990,000<\/td>\n<\/tr>\n<tr>\n<td>Average daily spend (990,000 \u00f7 90)<\/td>\n<td>\u20ac11,000<\/td>\n<\/tr>\n<tr>\n<td><strong>Days of cash<\/strong> (260,000 \u00f7 11,000)<\/td>\n<td><strong>23 days<\/strong><\/td>\n<\/tr>\n<tr>\n<td>Undrawn credit line<\/td>\n<td>\u20ac100,000<\/td>\n<\/tr>\n<tr>\n<td><strong>Days of cash including credit<\/strong> (360,000 \u00f7 11,000)<\/td>\n<td><strong>32 days<\/strong><\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<p>What it means for management: if every customer stopped paying tomorrow, Northern Foods could meet its payments for about three weeks with its own money, and a little over a month by drawing on the credit line. That is a thin cushion for a distributor that collects at 60 days.<\/p>\n<h2>Days of cash and runway are not the same<\/h2>\n<p>They are often confused, but they measure different things:<\/p>\n<ul>\n<li><strong>Days of cash:<\/strong> assumes you collect nothing more. It divides your balance by everything you pay. It is a snapshot of your cushion today.<\/li>\n<li><strong>Runway:<\/strong> takes collections into account. The simple version divides cash by the burn rate, what you lose each month after collecting and paying. The full version runs through your cash flow forecast, with expected collections and payments, and tells you the date you would run out of cash. Startups usually express it in months.<\/li>\n<\/ul>\n<p>Same example: if Northern Foods collects \u20ac320,000 a month on average and pays \u20ac330,000, it burns \u20ac10,000 a month. Its simple runway is 26 months (260,000 \u00f7 10,000), while its days of cash are 23. Both numbers are correct and answer different questions: runway, &#8220;how long can I keep going like this?&#8221;; days of cash, &#8220;how long do I last if collections stop?&#8221;. To go deeper into runway, read <a href=\"https:\/\/www.orama.ai\/en\/academy-tesoreria\/runway-how-long-will-my-business-last\/\">Runway: how long will my business last?<\/a><\/p>\n<h2>What the result means: rough thresholds<\/h2>\n<p>There is no official figure or accounting rule for how many days of cash a business should have. These thresholds are a practical reference for an SME and vary a lot by sector and by how long you take to collect:<\/p>\n<table>\n<thead>\n<tr>\n<th>Days of cash<\/th>\n<th>Situation<\/th>\n<th>What to do<\/th>\n<\/tr>\n<\/thead>\n<tbody>\n<tr>\n<td>Under 15<\/td>\n<td>Under strain: one large customer paying late could leave you without cash<\/td>\n<td>Week-by-week forecast, review outstanding collections and talk to the bank before you need to<\/td>\n<\/tr>\n<tr>\n<td>15\u201330<\/td>\n<td>You depend on customers paying on time<\/td>\n<td>13-week forecast updated every week and a collections plan<\/td>\n<\/tr>\n<tr>\n<td>30\u201360<\/td>\n<td>Room for one incident (a bad debt, a slow month)<\/td>\n<td>13-week forecast and pessimistic scenarios<\/td>\n<\/tr>\n<tr>\n<td>Over 60<\/td>\n<td>You can plan investment and hiring<\/td>\n<td>12-month forecast and a decision on what to do with the surplus<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<p>A restaurant or a shop collects daily and can live with fewer days of cash than a construction firm paid on progress certificates at 90 days. Compare your result with your own average collection period: if you take 60 days to collect and have 20 days of cash, any delay shows immediately.<\/p>\n<h2>How to improve your days of cash<\/h2>\n<ol>\n<li><strong>Collect sooner.<\/strong> Review the terms you give, invoice as soon as you deliver, use direct debit for recurring collections and chase overdue invoices in the first week.<\/li>\n<li><strong>Pay on the agreed date, not earlier.<\/strong> Paying early shrinks your cushion for no benefit, unless the supplier gives you a discount.<\/li>\n<li><strong>Cut fixed payments that add nothing.<\/strong> Subscriptions, duplicated insurance or oversized rent push up daily spend and pull down your days of cash.<\/li>\n<li><strong>Plan for large payments.<\/strong> Quarterly VAT, extra pay months or annual fees can be seen coming: if they are in your forecast, they do not surprise you.<\/li>\n<li><strong>Secure financing before you need it.<\/strong> A credit line signed in good time gives you days of cash including credit when you need them.<\/li>\n<li><strong>Check it every week.<\/strong> An indicator calculated once a quarter arrives too late. With a <a href=\"https:\/\/www.orama.ai\/en\/13-week-cash-flow-template\/\">13-week cash flow template<\/a> you can see how it evolves, and with an <a href=\"https:\/\/www.orama.ai\/en\/academy-tesoreria\/annual-cash-flow-forecasts\/\">annual cash flow forecast<\/a>, whether your days of cash hold up all year.<\/li>\n<\/ol>\n<h2>How Orama does it<\/h2>\n<p>Orama gives you the cash position of all your banks on one screen, updated up to 4 times a day. It connects to 100% of banks in Spain and 3,000+ across Europe and Latin America. That gives you both figures in the formula without hunting for them:<\/p>\n<ul>\n<li><strong>Available balance:<\/strong> the balance of all your accounts, and separately what is still available on your credit lines.<\/li>\n<li><strong>Average spend:<\/strong> in Reporting \u203a KPIs, the burn rate shows the average monthly cash outflow for the period you choose (for example, the last 3 months), together with average inflows and the cash you generate or burn.<\/li>\n<li><strong>Runway:<\/strong> Orama runs through your forecast day by day, tells you when you would run out of cash and flags each negative cash period with its maximum shortfall. You can simulate what happens if you only collect 75, 50 or 25% of what you expect.<\/li>\n<li><strong>Email alert:<\/strong> with email reports, Orama warns you when an account is going to fall below the amount you set.<\/li>\n<\/ul>\n<p>See <a href=\"https:\/\/www.orama.ai\/en\/features\/daily-cashflow\/\">up-to-date cash position<\/a> and <a href=\"https:\/\/www.orama.ai\/en\/features\/cash-flow-forecasting\/\">cash flow forecasting<\/a>.<\/p>\n<p class=\"orama-academy-cta\">Step by step in Orama Academy (in Spanish): <a href=\"https:\/\/academy.orama.ai\/analisis\/kpis-financieros\" rel=\"nofollow noopener\" target=\"_blank\">Financial KPIs (burn rate and runway)<\/a>, <a href=\"https:\/\/academy.orama.ai\/analisis\/tesoreria-diaria-y-escenarios\" rel=\"nofollow noopener\" target=\"_blank\">Daily cash and scenarios<\/a> and <a href=\"https:\/\/academy.orama.ai\/analisis\/reporte-por-email\" rel=\"nofollow noopener\" target=\"_blank\">Email reports<\/a>.<\/p>\n<p>Want to see your days of cash and your runway with your real banks? <a href=\"https:\/\/app.orama.ai\/?register=true\" rel=\"nofollow noopener\" target=\"_blank\">Start the 7-day free trial<\/a>, no card required, or <a href=\"https:\/\/www.orama.ai\/en\/demo\/\">book a 30-minute demo<\/a>.<\/p>\n<h2>Frequently asked questions<\/h2>\n<h3>Is days of cash the same as runway?<\/h3>\n<p>No. They are similar, but not the same. Days of cash assumes you collect nothing more and measures your cushion. Runway takes collections and payments into account (or runs through your forecast) and tells you when you would run out of cash; startups usually give it in months.<\/p>\n<h3>How many days of cash should an SME have?<\/h3>\n<p>There is no official figure. As a guide, under 15 days means strain and over 60 gives you room to plan. A distributor with \u20ac4M in revenue that collects at 60 days should aim to stay above 30.<\/p>\n<h3>Do I count outstanding collections?<\/h3>\n<p>Not in days of cash: it measures how long you last without collecting anything. To include expected collections, build a 13-week forecast or look at your runway.<\/p>\n<h3>What about credit lines?<\/h3>\n<p>Count them separately, as &#8220;days of cash including credit&#8221;. It is borrowed money that the bank may not renew, so it is best not mixed with your own cash.<\/p>\n<h3>How often should I calculate days of cash?<\/h3>\n<p>At least once a month, and every week if you are below 30 days. What matters is the trend: if it falls three months in a row, you have a problem even if your balance still looks comfortable.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Days of cash (also called days cash on hand) is the number of days your business could keep paying its expenses with the money it has in the bank today if it collected nothing more. You calculate it by dividing your available balance by your average daily spend: with \u20ac260,000 in the bank and \u20ac11,000 [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":1999,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"content-type":"","_joinchat":[],"footnotes":""},"categories":[10,9],"tags":[],"class_list":["post-1192","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-prevision","category-tesoreria"],"_links":{"self":[{"href":"https:\/\/www.orama.ai\/en\/wp-json\/wp\/v2\/posts\/1192","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.orama.ai\/en\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.orama.ai\/en\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.orama.ai\/en\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.orama.ai\/en\/wp-json\/wp\/v2\/comments?post=1192"}],"version-history":[{"count":1,"href":"https:\/\/www.orama.ai\/en\/wp-json\/wp\/v2\/posts\/1192\/revisions"}],"predecessor-version":[{"id":1204,"href":"https:\/\/www.orama.ai\/en\/wp-json\/wp\/v2\/posts\/1192\/revisions\/1204"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.orama.ai\/en\/wp-json\/wp\/v2\/media\/1999"}],"wp:attachment":[{"href":"https:\/\/www.orama.ai\/en\/wp-json\/wp\/v2\/media?parent=1192"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.orama.ai\/en\/wp-json\/wp\/v2\/categories?post=1192"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.orama.ai\/en\/wp-json\/wp\/v2\/tags?post=1192"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}