Days cash on hand measures how many days a business could sustain operations using only its existing cash and cash equivalents, without any new revenue. Calculated as cash / (annual operating expenses / 365).
Days cash on hand (DCOH) is a survival metric: if all revenue stopped today, how long could you keep the lights on? It divides current cash + cash equivalents by the daily operating expense burn rate. A business spending $1M/year operating (~$2,740/day) with $275K in cash has 100 days cash on hand. Healthy targets vary by business type. Hospital systems and nonprofits target 90–120 days as a financial strength benchmark. For SMBs, 30–90 days is a commonly cited target, with 60 days representing solid operational cushion. Startups and high-growth businesses often run 90–180 days because they are investing cash rapidly and need a larger buffer for fundraising timing. DCOH directly affects lending decisions. Lenders providing emergency working capital look at DCOH to understand urgency — a borrower with 5 days cash on hand is a very different risk profile than one with 45 days. For SBA applications, lenders look at business bank statement averages as a proxy for DCOH. Strong DCOH improves underwriting outcomes and negotiating position. To optimize DCOH: maintain a dedicated operating reserve account, time large expenses with receivable inflows, and use revolving credit lines to smooth seasonal gaps rather than depleting reserves.
Use cash operating expenses only — exclude non-cash charges like depreciation and amortization, exclude debt principal repayment (that's a financing activity), and include interest expense. The goal is to model daily cash outflows the business must fund from its reserve. Some analysts use total cash outflows from the cash flow statement instead of income statement operating expenses.
Lenders typically approximate DCOH from bank statements by calculating average daily balance relative to monthly operating expenses inferred from outflow patterns. A business with consistently low average daily balances — particularly spikes to near-zero — signals liquidity stress. Many alternative lenders look at minimum daily balance over 3 months as a proxy for DCOH health.
30 days is a common minimum threshold. Below 30 days, a business has very little buffer for a missed payment, a slow receivables month, or an unexpected expense. Healthcare, government contractors, and nonprofits typically target 90+ days. Service businesses with predictable monthly revenue can sustain safely on 30–45 days.