Cash position: a practical example

Let's look at a tech company, "SaaS Ltd.," to illustrate the importance of cash positioning. SaaS Ltd. has fixed monthly costs of €500,000, which cover salaries, rent, and other operational expenses. The company’s current cash position is at €800,000.

Day 1: Revenue

A customer settles an outstanding invoice of €300,000, boosting the cash position to €1.1 million. With this amount, SaaS Ltd. can comfortably cover its expenses for the next two months without external funding, even if no new revenue comes in.

Day 10: Unexpected expenses

An unforeseen tax payment of €200,000 reduces the cash position to €900,000.

Day 25: Salaries and wages

At the end of the month, SaaS Ltd. disburses €400,000 for salaries and wages. This leaves the company with €500,000. While this cash position covers the company's expenses for another month, it's clear that generating additional revenue is crucial to maintaining liquidity in the future.

This example highlights the critical need for vigilant cash flow management. Even a single unplanned expense can significantly affect liquidity. To safeguard financial stability, companies should implement robust cash flow analysis, cash flow monitoring and forecasting strategies. Other than that: read our article on how to protect your cash balance.

What are elements of cash position?

A company's cash position includes all liquid assets readily available to meet its obligations. In detail, the cash position contains the following elements:

1. Cash

Plain and simple: cash covers all the company's physical cash, including what's in registers, safes, and petty cash funds.

2. Bank balances

• Current accounts: these are the funds in checking accounts that are readily available for immediate use. They form the backbone of your cash position, primarily used for daily transactions.
• Overnight deposits: these are short-term deposits that can be accessed instantly, making them an essential part of your cash position.

3. Short-term investments

• Term deposits: funds locked in for a short duration, ranging from one day to a few months. Depending on the type, they can be quickly liquidated if needed.
• Money market funds: these invest in highly liquid, short-term instruments like treasury bills, commercial papers, or short-term bonds, offering swift access to your capital.
• Deposits with other financial institutions: companies may hold deposits with other banks. While not always available daily, these can be liquidated at short notice.

4. Checks and Payment Advice

Uncashed checks and initiated payments awaiting credit are included in the cash position.

5. Receivables from short-term funding

Short-term loans with assured repayment can be considered part of the cash position. 

The cash position typically comprises a mix of these components. The finance team actively manages them to ensure enough liquid assets are available to meet short-term obligations and optimize the use of funds.

The makeup of the cash position varies based on the company’s operations and liquidity strategy.

Companies in stable, low-risk environments may allocate more to short-term investments, while those in volatile or seasonal markets may prioritize immediate access to cash.

Why manual cash positioning falls short

Manual cash positioning is slow, inefficient, and error-prone. Treasurers must log into multiple bank portals, download reports, and compile data by hand. Spreadsheets must be updated monthly. This involves entering cash balances and identifying decreases or one-off transactions to accurately forecast the cash position.

This fragmented approach squanders time and resources. Even with BI tools, you're still managing static data that doesn’t provide real-time updates.

Consequently, decisions are often made with outdated information, resulting in missed opportunities and liquidity challenges.

Relying on manual processes to track cash positions keeps you bogged down in low-value tasks, diverting you from strategic, high-impact initiatives that drive your company forward.

Real-time cash positioning via APIs

Today, companies no longer need to manually assess their cash position. APIs enable direct connections between bank accounts and a centralized platform. This setup provides automated, real-time updates on cash balances across all your accounts. As a result, you can eliminate manual data pulls and normalization, ensuring timely visibility into your cash position.

With an API-first liquidity platform, such as re:cap, you can access real-time insights from a single dashboard. You can connect and choose from over 14,000 bank accounts.

This approach saves time and improves accuracy by offering richer data, including detailed transaction metadata. Such information enhances your ability to categorize, analyze, and forecast cash movements effectively.

APIs provide speed and accuracy, enabling quicker and more informed decisions on liquidity, investments, and capital allocation.

Cash position is a company's pulse

Your cash position is more than just a number. It's the lifeblood of your business. That’s why cash positioning and cash flow planning is essential to a company’s stability.

By consistently monitoring and actively managing your cash, you safeguard your financial health and equip your business to navigate macroeconomic challenges with confidence. A robust cash position isn't just important, it's critical to your company’s long-term success.

Summary: Cash position

A company’s cash position reflects the total amount of liquid assets readily available to meet short-term obligations. This includes cash, bank balances, short-term investments, and receivables. It offers a real-time snapshot of financial health and liquidity. By actively monitoring this position, a business ensures it can cover daily expenses, absorb unexpected costs, and continue operations without needing outside financing. Even a single unplanned outflow, like a surprise tax bill, can quickly strain liquidity. This makes ongoing visibility and control essential.

Manual cash positioning, based on spreadsheets and disconnected bank portals, is slow and error-prone. Today, API-powered platforms connect directly to bank accounts. They pull data in real-time and consolidate it into one dashboard. This automation improves accuracy, saves time, and enables smarter decisions about liquidity and capital allocation. A strong cash position is a strategic foundation that protects your business and supports long-term success.

Q&A: Cash position

What is the difference between cash position and cash flow?

Cash position shows how much liquid cash a company has at a specific point in time. Cash flow tracks how cash moves in and out of the business over a period of time.

In short, cash position is a snapshot. Cash flow is a timeline. Both are essential to understand a company’s financial health.

What is a cash position calculation?

To calculate your cash position, add up all liquid assets that are immediately available. This typically includes:

• Physical cash
• Bank account balances
• Short-term deposits and money market funds
• Uncashed checks or pending incoming payments
• Receivables from short-term funding

The total gives you your current cash position: your real-time liquidity status.

How often should you review your cash position?

Ideally, cash position should be reviewed daily or at least weekly. For companies with high transaction volumes or tight liquidity, daily reviews are critical.

Regular reviews help spot issues early, avoid cash shortfalls, and support better decision-making.

What does the cash position say about a company?

A strong cash position signals that a company is financially stable, well-prepared for expenses, and able to act quickly when opportunities or risks arise.

A weak or declining cash position may point to liquidity risks, inefficient operations, or poor cash management.

Is cash position the same as cash on hand?

Not exactly. Cash on hand usually refers to physical cash or money in checking accounts. Cash position is broader. It includes cash on hand plus other liquid assets like short-term investments and pending incoming payments.

Cash on hand is a part of your cash position but not the whole picture.