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Manish Kumar September 27, 2023 0 Comments

The quantity of cash that a business or individual has available at any particular time is referred to as their cash position, which is an important measure. It gives information about an entity’s liquidity and general financial health, demonstrating its capacity to pay bills quickly, support operations, and make investments in new prospects. Making wise financial decisions requires an understanding of your cash condition. But how exactly do you determine your current cash position? In this guide, we’ll explore the concept of cash positioning and delve into methods to accurately ascertain your present cash status. Let’s go to depth and understand it deeply.

Understanding Cash Position

The cash position of a corporation refers to the quantity of liquid assets it has on hand at any particular time, which are often cash and cash equivalents. This statistic is essential for daily operations since it shows how effectively a company can handle its current financial responsibilities.

Why Monitor Cash Position

Regardless, of the size and  nature of your business, it is important to monitor your cash flow for multiple reasons, including:

1. Managing Cash Flow:

Cash flow is a company’s primary source of finance. Your financial situation has an immediate impact on your capacity to pay creditors, meet operating expenses, and engage in business expansion opportunities. 

2. Ensuring Adequate Liquidity:

Your capacity to quickly convert assets into cash is referred to as liquidity. By keeping a strong cash position, you can fulfill immediate financial responsibilities without turning to external funding sources like loans or credit lines.

3. Avoiding Financial Crises:

A strong cash position serves as a financial safety net during periods of economic instability or unforeseen expenses. It supports your company’s ability to withstand storms and get through trying situations without taking drastic actions.

How to Find Your Current Cash Position

Now that you understand the importance of cash position, let’s explore how you can determine your business’s current cash position:

1. Reviewing Financial Statements

Balance sheet

Your balance sheet offers a snapshot of the financial situation of your company at a certain period. Your equity, obligations, and assets are listed. Look for the “cash and cash equivalents” line item on the asset side to determine your cash situation.

Cash Flow Statement:

The cash flow statement maintains track of how much money enters and leaves your business over a specific period. 

2. Utilizing Accounting Software

Investing in accounting software can simplify cash position monitoring. Modern accounting software solutions offer features like real-time updates, automated bank reconciliations, and customizable reports that allow you to track your cash position effortlessly.

Benefits of Financial Software:

1. Accuracy and Efficiency: Reduce manual errors and save time on data entry.

2. Real-Time Insights: Access up-to-date financial information at your fingertips.

3. Custom Reports: Generate cash position reports tailored to your business’s needs.

4. Manual Tracking: For smaller businesses that have limited resources or manpower, manual tracking will be an affordable choice for them. Here’s how we will go:

Creating a Cash Position Spreadsheet:

  • Open a spreadsheet program like Microsoft Excel or Google Sheets.
  • Create columns for cash on hand, bank balances, cash equivalents, and a total column.
  • Regularly update the spreadsheet with the latest figures from your financial records.

Recording Cash Transactions:

Keep a record of all cash transactions, including cash sales, expenses, and withdrawals.

Maintain a ledger to track changes in cash balances. While manual tracking may be more time-consuming, it can still provide valuable insights into your cash position.

Tools and Techniques

To gain a deeper understanding of your cash position and make informed decisions, consider using the following tools and techniques:

1. Cash Position Ratios
Current Ratio: 

The current ratio contrasts your current liabilities with your current assets, which include cash and cash equivalents. A ratio greater than 1 indicates that you have more assets than liabilities, reflecting a healthy cash position.

Quick Ratio:  

Similar to the current ratio, the quick ratio excludes inventory from current assets. It provides a more conservative view of your cash position, as inventory can be less liquid.

2. Cash Flow Forecasting

Cash flow forecasting involves projecting your future cash flows based on expected income and expenses. By predicting cash surpluses or shortages, you can proactively manage your cash position.

3. Automated Cash Management Solutions

For larger businesses, or those with complex cash management needs, automated cash management solutions can be invaluable. These may include treasury management software or cash positioning services, which streamline cash management processes and provide real-time insights.

Best Practices for Managing Cash Positions

To maintain a healthy cash position, here are some best practices to consider:

1. Regular Monitoring

Continuously monitor your cash position to identify trends or anomalies. Regular reviews help you stay proactive in managing your finances.

2. Setting Cash Reserves

Establish cash reserves or a cash buffer to cover unexpected expenses or capitalize on opportunities.

3. Efficient Receivables and Payables Management

Streamline your accounts receivable and accounts payable processes to optimize cash inflows and outflows.

4. Investment Strategies for Excess Cash

If you consistently maintain excess cash, consider investment options that provide a return on your idle funds.

5. Risk Mitigation:

Assess potential risks to your cash position, such as market fluctuations or economic downturns, and develop contingency plans.


Understanding and controlling your cash position is critical in the dynamic corporate world. Making sure your company’s finances are stable and sustainable is more important than just the figures on a balance sheet. By regularly monitoring your cash position and implementing best practices, you can navigate financial challenges and seize opportunities for growth with confidence. So, take control of your cash position today, and secure a brighter financial future for your business.

Manish Kumar

CEO and Founder, KredX

Manish spent a decade in the finance and banking industry, including a successful stint at HSBC, before founding KredX in 2015. He took his expertise in accelerating capital velocity and created a platform that has become a growth catalyst for hundreds of Indian businesses, big and small. The journey has been triumphant, KredX featured among the top 100 leading global Fintech innovators in the KPMG-H2 Ventures 2017 Fintech100 list and Manish was recently awarded the Entrepreneur of The Year in Business Services at the Annual Entrepreneur India Awards. You can reach him through LinkedIn.