Cash and A/R Balance
Total near-term liquid working capital available to the business: cash and cash equivalents on hand plus customer invoices issued but not yet collected.
◆ Currency
Formula
What it measures
The sum of every operating bank balance — checking, savings, and liquid money market funds (cash balance) — plus the total of all customer invoices issued but not yet paid (accounts receivable) as of a specific reporting date. It excludes inventory, fixed assets, deferred revenue, restricted cash, undrawn credit lines, and contracted-but-not-yet-billed recurring revenue. It is a balance-sheet snapshot of available liquidity, not a measure of revenue or cash flow.
Why it matters
Cash and A/R is the heartbeat of solvency. It tells you how much working capital is immediately, or near-immediately, available to meet payroll, pay vendors, fund growth, and absorb revenue delays or customer defaults. Compared against monthly burn, it is what turns into runway — the single most important number when capital is tight or a raise is in motion. Revenue describes the trajectory of the business; cash and A/R decides whether it survives long enough to get there. A company with $500K MRR but only $50K of cash and A/R is in immediate jeopardy; one with $100K MRR and $1.2M of cash and A/R can weather a bad quarter.
How to read it
Read cash and A/R as a trend line against burn, never as a single snapshot. Divide the balance by monthly cash burn to get runway in months — that ratio, not the raw number, is what tells you how much room you have. Rising cash and A/R alongside growth usually signals healthy collections (low DSO) and positive operating cash flow; flat or declining cash and A/R while revenue grows is a warning that cash conversion is breaking down. Always split the two halves: if A/R is climbing but cash is flat, customers are paying slower (DSO is lengthening) and reported liquidity is overstated relative to what is actually spendable.
What good looks like
Good
Cash and A/R covers 6-12 months of operating expenses and is stable or growing month-over-month as revenue scales; A/R aging concentrated under 45 days.
Watch
Cash and A/R covers 3-6 months of expenses, or is declining despite growing revenue (cash conversion deteriorating); A/R-to-revenue exceeding ~45 days of sales.
Bad
Cash and A/R trending downward with under 3 months of runway; A/R aging beyond 60 days or concentrated in distressed accounts.
Watch-outs
- Reporting A/R at gross and ignoring aging. A $1M A/R balance is worth far less if most of it is over 90 days old or owed by distressed customers. Always age receivables (0-30, 31-60, 60+ days) and net out a realistic allowance for doubtful accounts before treating A/R as liquidity.
- Confusing the balance with cash flow. This is a static snapshot, not a movement. A company can hold $2M in cash and A/R and still burn $500K a month — that is four months of runway, not a safety net. Always read it next to burn rate and operating expense.
- Counting restricted cash or deferred revenue. Escrowed cash, debt collateral, and customer prepayments received in advance are not spendable liquidity. Including them manufactures false security; exclude them.
- Treating A/R as collected cash. Receivables are a promise to pay, exposed to non-payment and age decay. A dollar of A/R is not a dollar of cash, and the gap widens as DSO grows.
- Ignoring currency and entity fragmentation. Across multiple geographies, verify cash and A/R are stated in one reporting currency and that subsidiaries are included consistently. Regulatory limits on moving cash between countries can trap liquidity you are counting as available.
Worked example
Hypothetical
On June 30 the company holds $400K across checking and savings, $150K in unpaid customer invoices (A/R), and $250K in accounts payable. Cash and A/R Balance is $550K. Payables are excluded — they reduce net working capital but are not part of this metric, which measures available liquidity, not net position.