2 min read
Definition
A cash buffer is a reserve of cash a business keeps in hand to absorb the normal ups and downs of trading — the same idea as a cash reserve, viewed as the margin of safety that keeps everyday wobbles from becoming crises.
In plain terms
A common target is three to six months of fixed costs, though the right size depends on how predictable your income is. Lumpy revenue, big customers or slow payers all argue for a larger buffer.
Why it matters
A buffer means a late-paying customer or a quiet month is something you ride out, not a scramble. See building a cash buffer and how to build one.
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