Cash

Cash is the money a business has available to spend straight away. It is what the business uses to pay for goods, services and debts as they fall due.

Cash is held either in hand, such as notes and coins in a till or safe, or in a bank account the business can pay from by card or bank transfer. It is more than the physical money in a shop till.

Why a business needs cash

A business always has bills to settle in the short term, whatever its sales or profit figures say on paper. Cash is what pays these everyday costs, such as:

• stock and materials from suppliers
• wages for staff
• rent for a workshop or a market stall
• repayments on a loan
• insurance and other regular bills

These payments are due on set dates, so the money has to be in the business's account at that moment. They must be paid whether or not the business has made a profit, which is why cash is what keeps a business trading from one week to the next.

Suppose you run a small print shop. On Monday your business account holds £400. That week you owe £140 for paper and card, £110 towards the loan on your printer and £60 for business insurance, a total of £310. The cash is there, so all three payments go out on time and you still have £90 for the rest of the week.