Cash and Cash Equivalents
What does it mean
Cash and Cash Equivalents is the sum total of all cash in checking and savings accounts that is readily available for use in the business. It also includes other non-checking/savings accounts by definition, but for most small businesses that a community bank works with, this figure represents checking and savings accounts.
Why does it matter
The level of cash matters in a business because cash is the oil that keeps the machine (business) running. Most businesses do not go out of business because they are losing money, but rather they go out of business because they run out of cash. If the business doesn’t manage their cash appropriately (purchase too much inventory, rapidly paying down long term debt, excessive capital purchases) they run the risk of not being able to have enough cash to do essential items like payroll, pay suppliers or pay their creditors (that’ you!!). In those instances, the business can seize and close; so monitoring their cash level as well as recognizing their operating cycle is key for seeing the risks present in a business.
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A bit about me
Greetings! I'm Clay Sharkey, and there is nothing I like more than assisting others in achieving their goals. I firmly believe that by enhancing a banker's understanding of their customer's' business, they can provide superior service. This superior service, in turn, leads to stronger relationships for the bank, improved performance for the businesses, and better experiences for our communities. Win-win-win.
