Question 1

How much cash should a business keep in reserve?

Accepted Answer

A common rule of thumb is three to six months of operating expenses. One month is the bare minimum, three months is a healthy floor for most owner-operated businesses, and six months gives you room to absorb a downturn or a late-paying customer without touching payroll. Seasonal and project-based businesses usually target the higher end.

Question 2

What is a cash buffer?

Accepted Answer

A cash buffer — also called a cash reserve or operating reserve — is money you deliberately set aside to cover operating expenses when income dips or an unexpected cost lands. It is measured in months of expenses, not a flat dollar amount, so it scales with the size of your business.

Question 3

How do I calculate my cash buffer target?

Accepted Answer

Multiply your average monthly operating expenses by the number of months you want to hold in reserve. If you spend $30,000 a month and want a three-month buffer, your target is $90,000. Subtract the cash you already have to find the gap you still need to save.

Question 4

How can I build my cash buffer faster?

Accepted Answer

Increase the amount you set aside each month, tighten collections so cash arrives sooner, trim non-essential expenses, and separate the reserve into its own account so it is not spent by accident. Even a small, automatic monthly transfer closes the gap steadily — the calculator shows exactly how the date moves as you change the amount.

Cash Buffer Calculator