Cash on Hand refers to the physical currency and coins readily available in a company's possession for immediate transactions and expenses.
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Last Updated: December 1, 2025
Cash on hand can be defined as the amount of accessible cash a business has after paying all its costs. Generally, it includes any assets that can be liquidated into cash within 90 days or less. It does not include money that the business cannot spend, such as the minimum balance needed to keep a business bank account open.
Somewhat misleadingly, cash on hand need not actually be paper cash. It simply must be readily available money that can be paid or easily transferred. In some circumstances, business owners may refer to cash on hand by other terms, such as cash equivalents, reserve funds, or just cash.
Having cash on hand allows a company to pay rent, operating costs, and vendors if the business’s income stream slows down. Depending on the type of business, it’s advisable to have three to six months of operating expenses on hand. Some businesses experience seasonal fluctuations and need to adjust their cash on hand accordingly to navigate these changes.
Another one of the advantages of having cash on hand is that it allows a company to seize investment opportunities without having to wait for financing or incur debt liability. That said, if a business owner encounters an opportunity to expand their company, they’d be wise to weigh the opportunity costs of expansion against the potential risks of depleting their cash on hand.
How much cash a business has on hand reflects on the financial health of the company. If the brand’s cash flow statement indicates that it has sufficient cash on hand to sustain normal operations for an extended period, potential investors, partners, or customers are likely to view the business as a healthy one.
A company’s cash on hand also provides an indicator of its financial worth.
If a business has too much cash on hand, it could mean that the company isn’t maximizing its growth opportunities. Smart business owners strike a balance between maintaining a reserve of cash on hand and using their money to grow their wealth. It can be wise to invest and not keep all of the funds on hand as cash.
Commonly a small business will have petty cash, which is actual bills kept onsite. This money may be used for minor daily expenses instead of using a credit card or check. Businesses use petty cash for things like buying lunch to serve at a meeting or paying an electrician $100 for an unexpected repair.
In contrast, cash on hand covers all the company’s operating expenses during a slow business season. Cash on hand is usually not stored on the business’s premises.
Any actual cash on-premises, checking accounts, and savings accounts would be classified as cash on hand. A piece of real estate that could be sold for cash would also count as cash on hand. Cash on hand primarily consists of any assets that can be quickly liquidated if the need for funds arises.
Cash on hand is the cash that a business has available to use after it has paid all of its expenses. Every business should prioritize having enough cash on hand to cover its operating expenses for several months to safeguard against unexpected setbacks.
To calculate how much cash on hand is needed, it’s important for a business owner to track all their expenses and taxes carefully. ZenBusiness can help business owners walk through the accounting and budgeting tools they’ll need to stay organized. For those who want even more help, ZenBusiness Money Pro is a bookkeeping app that helps small business owners keep their finances organized in one place.
Disclaimer: The content on this page is for information purposes only and does not constitute legal, tax, or accounting advice. If you have specific questions about any of these topics, seek the counsel of a licensed professional.
Written by ZenBusiness Editorial Team
The ZenBusiness Editorial Team has more than 20 years of combined small business publishing experience and has helped over 850,000 entrepreneurs launch and grow their companies. Our writers and business formation experts are dedicated to providing accurate, practical, and trustworthy guidance so business owners can make confident decisions.
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