A Cash Guide for a Good Night’s Sleep

“Cash… is like oxygen — you don’t notice it until it’s gone.” Warren Buffett

Before I talk about the cash in your business, I want to first talk about personal money.  In providing cash advice I have learnt that the two are deeply linked in a business owner’s mind.

I get asked questions like:

• “What should I pay myself?”
• “How much do I need in the bank before I can relax?”
• “When is it OK to book the holiday without guilt?”

Founders tend to swing between two extremes:

• Some take too little, hoarding cash “just in case” living smaller than their business can actually afford.
• Others take too much, drawing aggressively in good months and leaving the company gasping in the bad ones.

That same psychology plays out in the business too.  Some hoard or hesitate because they don’t trust the rhythm of their own business cash flows.  The honest truth is there’s no formula; it depends on the context.

Which brings me to the question I hear more than any other……..

The Truth I Hear Every Week

If there’s one sentence I hear from almost every business owner I speak to, it’s a form of this: “I can’t sleep — I’m worried about cash.”

Interestingly, for some, it’s the fear of running out, but for others, it’s the guilt of sitting on too much and not knowing how to use it wisely.

Cash anxiety doesn’t come from numbers. It comes from uncertainty, not knowing whether you’ve done enough, planned enough, or protected enough.

That’s why resilience isn’t about how much cash you have.  It’s about how well you understand it.

Two Examples

Here are two common cash flow scenarios.

A Company has £600,000 sitting in their account. They are proud of their buffer, but they are nervous about investing in automation, new hires, or marketing.  Meanwhile, their competitors do invest, the company loses customers, and cash is diverted to cover losses. By the time they actually do act the safe cash has eroded under the impact of lost opportunity.

Second scenario.   A Company is growing fast, bringing in big clients and it hires rapidly to satisfy the work.  The live cash forecast is poor as they are changing so fast. Then a key project is delayed, payroll cannot be met, and they are scrambling for an overdraft, and to cut costs.

Situation 1: Cash is abundant but courage is low. Why? Because they didn’t have a framework for when it was safe to invest.

Situation 2: The problem was bad visibility. They didn’t know what they didn’t know, and they were winging it on the sails of what seemed like cash positive growth.  They didn’t have a framework for when it was safe to invest.

It is the same problem in both cases.

Both stories show that resilience doesn’t come from how much cash you hold.   It comes from knowing how quickly it moves, and how quickly you need to be prepared to respond.

Cash Creates Fear

Many more intelligent people than me have commented on cash for centuries.  The quote at the start of this piece from Warren Buffet being a famous one.  For me, my comment is that cash sits at the intersection of logic and emotion.

Suddenly, when it comes to cash, it’s where business owners’ deepest fears start rearing their head.  The fear of running out, the fear of wasting opportunity, the fear of making the wrong call.

But the truth is: Cash isn’t a comfort blanket, it’s a tool. And like any tool, its value depends on when you use it and how well you use it when you do.

The CFO Framework for Resilient Cash

When I talk about resilient cash I  don’t mean a fixed number in the bank. I mean readiness, the ability to absorb shocks and seize opportunities without panic.

Here’s the framework I use with clients:

• Identify your Baseline Buffer:

1. 1. • This is the money that enables you to sleep at night
      • Aim to cover at least 2–3 months of fixed costs: payroll, rent, subscriptions, loans etc.
      • The exact amount depends on how easily you sleep, your business model and risk appetite, but 2-3 months is a solid security cash buffer; you now know you have 2-3 months cash runway in which you can react calmly even if income pauses completely.

• Understand your Operating Liquidity 

1. 1. • This is how money flows in your business and understanding the rhythm of your inflows and outflows weekly.
      • Understand the processes in agreeing to variable costs, agreeing terms on payments and how you get invoices raised and paid from customers.
      • Forecast rolling 12 weeks ahead so you see problems early.
      • Get total understanding of all the money flows so that you can never be surprised by a cash shortfall.

• Start building your Growth Money

1. 1. • Create a separate pot for your longer term strategic moves e.g. hiring, marketing, investment.  
      • As far as you are concerned your week to week cash flow cannot access or rely on this reserve.  Behave like it doesn’t exist when it comes to the 12 weeks ahead. 
      • Define when you trigger money spending from this reserve, e.g. If cash stays above £X for three consecutive months, we start the hire of our CMO.
      • You have now divorced the emotion of spending today’s cash into a cold, black and white, binary growth policy.

• Create your Emergency Money Moves

1. • Have a series of pre-approved facilities you can draw down on very quickly e.g. pre approval on a pay as you go invoice discounting facility or an overdraft facility.
   • The best time to ask for lending is when you don’t need it, lenders love you as you are low risk. However, when you are desperate, the doors will close all around you.
   • Use these facilities to smooth bumps in your 12 week cashflow, not your growth reserve. This protects your current without sacrificing your future.
   • Cash resilience covers access to cash, not just possession of it.

Simple Actions to Get Moving

• Build a 12-week cash forecast and update it every single week without fail. Awareness builds calmness.
• Get the banking facilities set up to separate your pots of cash: 12 week operating, emergency, growth.
• Set the clear thresholds required so there is clarity on when to save, when to spend, when to pause.
• Start preparing for your worst case e.g. what’s the plan if our top 3 customers fail overnight. Understanding the impact of the worst case scenario your business can suffer means you can sleep even through the worst times.
• Share Cash Visibility and bring the team into the numbers. When you are concerned about cash that spreads into the decision making of your team around you; conversely transparency on cash spreads confidence.

Closing Thought

Cash worries and lack of sleep do not magically end when your bank balance hits a specific number.  There is no huge bell that rings in your office to tell you you’re done with cash.  The worries stop when the understanding grows.

Resilient cash isn’t about hoarding or gambling, it’s about context, risk, and readiness.

“Cash doesn’t create stability. Clarity does.”  Niall McGinnity

Main Image Credit: Photo by Andreas Wagner