Cash is King: cash flows, account balances and liquidity reserves

For most small businesses, cash reserves are an important liquidity reserve instrument for covering their cash requirements. Deposits that are always available in the business account provide a means, available at any time, of paying employees and suppliers in normal times, and in difficult times they are an important factor to fall back on. This is especially true for small companies with their limited access to loans and other sources of liquidity. In other words, cash reserves are a key measure of a small company’s vitality, resilience and security.

Update September 2026: Five years after this study, the JPMorgan Chase Institute measured again, with an even tighter result: half of small businesses had fewer than 15 cash buffer days. The new figures and what they mean for companies in Germany, Austria and Switzerland are at the end of this article.

Using a data set of more than 470 million transactions from around 600,000 small businesses between February and October 2015, an analysis by the JPMorgan Chase Institute shows that half of all small businesses in the USA hold a liquidity reserve equal to 27 days of their typical outgoing payments.

Finding #1 – cash flows of US small businesses far lower than assumed

The median small business in the USA has average daily outgoing payments of USD 374 and average inflows of USD 381. Converted as of May 2019, this means average monthly inflows of around EUR 12,800 and outflows of EUR 12,570.

Outgoing payments here refer to debits from business accounts, such as the purchase of materials, salary payments, owner withdrawals, loan repayments or tax payments. There are large variations within an industry and between industries.

Inflows refer to credits to business accounts, such as revenue, owner contributions, loan financing or tax credits.

Finding #2 – small businesses hold a daily cash balance of around EUR 13,550

Naturally there are large variations within an industry and between industries.

With average inflows and outflows of roughly EUR 430 per day (roughly EUR 155,000 per year) and average liquidity reserves of only EUR 13,550, the typical small business can provide few full-time jobs once its other expenses are covered. Without good, continuous cash flow management, even small changes in cash inflows or outflows – especially unexpected ones – can have a major impact on the financial health of these companies.

Finding #3 – the median US small business has a liquidity reserve of 27 days

The variations within an industry and between industries are naturally large.

Liquidity reserves measured in days, also known as cash buffer days, provide a useful benchmark for individual small businesses. Although it is clear that the small business sector is heterogeneous and every company has its own challenges, cash flows, balances and the liquidity reserve measured in days can illustrate the liquidity and financial resilience of small businesses.

A large share of small businesses in the USA has limited liquidity. That makes them vulnerable to economic crises. With an average of only 27 cash buffer days – and far fewer in industries such as restaurants or repair and maintenance work – the typical small business has a low margin for error in the face of economic headwinds and crises.

Given that cash flow management, that is, cash flow planning and cost management, are the two most important concerns of small business owners, and given the uncertainties of short-term credit options, JPMC assumes that most small business owners hold the cash kept in their accounts as a financial buffer.

In addition to regional or market-wide economic crises, many small businesses also face unexpected expenses, late or unpaid customer payments or other specific challenges. Considering that the average small business receives only around EUR 430 per day, these challenges do not have to be large to do damage.

And while some small businesses are lucky enough to gain access to loans, it may be too little too late. Small businesses in the USA have to wait an average of 60 to 90 days to receive loans. As a result, most small businesses depend on their cash buffer days to survive crisis situations. But money for 27 days leaves the typical small business a very limited margin for error.

Update 2020: only 15 cash buffer days left

The same researchers measured again in 2020, this time with 1.4 million small businesses in 25 US metro areas. The result: half of small businesses were operating with fewer than 15 cash buffer days. Only 40 percent had more than three weeks of reserves (JPMorgan Chase Institute, April 2020).

The two analyses are based on different samples and cannot be compared one to one. The direction is clear all the same: the buffer has become thinner. If income stops for just over two weeks, half of small businesses are in trouble.

And in German-speaking countries?

There is no comparable analysis of the same figure for Germany, Austria and Switzerland. But the available figures point in the same direction:

• Insolvencies at their highest level in more than ten years. In 2025, around 23,900 companies filed for insolvency in Germany, 8.3 percent more than the year before. About 19,500 of them were micro-businesses with up to ten employees, more than four out of five cases (Creditreform).
• Longer payment terms. 54 percent of the companies surveyed in Germany accepted longer payment terms last year so as not to get their customers into difficulties (Intrum, European Payment Report 2025). What gives the customer breathing room is missing from the supplier’s till.
• Solid on average, but not everywhere. The average equity ratio of German SMEs was 30.7 percent in 2024. But more than a quarter of them (28.4 percent) had an equity ratio below 10 percent (KfW SME Panel 2025).

What follows from this

If a company has only a few weeks of buffer, the challenges don’t have to be big to do damage. A customer pays a month late, a machine breaks down, a tax payment comes earlier than expected. Loans often come too late in moments like these. That is why the buffer in the bank account is the most important insurance for many small businesses, and the plan that shows when it will be needed is the most important tool.

Work out your own cash buffer days once: bank balance divided by average daily outgoing payments. The result tells you how long your business can last without new income, and it is often more revealing than any balance sheet ratio.

How to turn this into a plan is shown in our free crash course in cash flow planning. All the figures in context and the way from plan to payment are in the eBook “From Plan to Payment”.

Credits: Photo by NeONBRAND on Unsplash