Cash Capacity

Hey money makers! Today I wanted to share with you how to calculate your cash capacity in your business. This can be a really useful matric. First of all you need to know what what the balance in your bank account is up to date. What is your current account balance? Then you’ll need to know what your accounts payable total is (what you owe to others) and what your payroll requirements are over the next 60-days. What you do is take the cash in the bank and divide it by your accounts payable and payroll due for the next 60-days and that will give you a number. If the number is between 1 and 3 the business is healthy in terms of cash. If you get a negative number like -1 your business is not so cash healthy. If you’re higher than 3 then it’s bloated in terms of cash. If you’re below 1 then you need to look at a cash management strategy to bring that back into a healthier position.

 

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