When money is scarce, having cash on hand or money set aside in case of an emergency can keep a firm operating or enable it to seize unanticipated chances like a sizable growth or investment opportunity. Without sufficient cash on hand, a company is unlikely to withstand a financial crisis or avoid having to sell off assets to cover its losses.
Any readily available cash, money in bank accounts, or liquid assets that could be accessed in less than 90 days are referred to as “cash on hand.” Generally speaking, it’s advised that businesses keep three to six months’ worth of cash on hand to cover running expenses, though you should make sure that you have more.