Why cash matters to a first-time founder
A business can report profit and still fail if it lacks cash when wages, tax or suppliers are due. Monitoring available money, restricted balances and payment timing lets founders act before a shortfall. Cash also provides resilience, but excessive idle balances may earn little and lose purchasing power through inflation.
Examples of cash
A studio has $42,000 in its current account and $3,000 in petty cash. It also holds a $20,000 term deposit that cannot be withdrawn for six months. For next week’s $18,000 payroll, the readily available $45,000 matters; the locked deposit should not be treated as usable cash without checking its terms.
Common misunderstanding
Cash is not revenue, profit or cash flow. Revenue records sales, including sales not yet collected. Profit subtracts recognised expenses under accounting rules. Cash flow records movements of money during a period. Cash equivalents are separate highly liquid short-term investments that accounting standards may present alongside cash if they meet specific criteria.
When to use it
Use the term for money available now, but state whether restricted accounts, client money or foreign currencies are included. Review the bank position alongside near-term receipts and payments, not in isolation. For runway planning, use accessible business cash and realistic net burn rather than the balance visible on one unusually favourable day.