Understanding Cash Float: Importance and Practical Uses for Businesses

Understanding Cash Float

A cash float is just a small stash of money your team can tap into for daily things. This is not intended for significant expenses but rather for smaller, frequently unforeseen costs that arise when managing a tight budget. If you're running a design studio, software firm, or early-stage SaaS company, this is your way of staying ready without slowing things down.

Perhaps your team requires an immediate purchase of a S$50 plugin. Or someone needs to pay a S$70 rush fee to a freelancer for a bug fix before launch. These aren’t things you want stuck waiting for approvals or finance to sort out. A petty cash float—say, S$500 in a team wallet, a separate bank account or corporate card—makes it easy to act fast when needed.

Having this in place keeps things smooth. It’s not about spending more—it’s about not losing time. Whether it’s renewing a domain before it lapses or getting extra cloud storage late on a Friday, that bit of float helps you keep moving without bottlenecks.

What It Covers:

• Your cash float ensures you can pay for minor things, like office supplies or lunch for your team, without needing to dip into your larger cash reserves. It is used to manage cash transactions smoothly while maintaining enough liquidity.

Where It Can Be Found:

• Cash flow may be in a petty cash fund or a separate account as part of your working capital. The key is that it's readily accessible when needed. It's all about maintaining a balance between available cash and upcoming expenses.

Why You Need It:

• It’s your operational cushion. It helps your team move without bottlenecks, prevents project delays, and gives you breathing room when cash inflow is slower than expected.

How It Helps:

• You will not be caught off guard when your cash float is in check. It keeps your business humming, bills paid, and your mind focused on growth instead of scrambling for spare cash.

Types of Cash Float

1. Disbursement Float

When you make a payment, say, write a cheque or approve a GIRO transfer, but the money doesn’t leave your account immediately. This delay is a disbursement float.

Let’s say you run a wholesale trading business in Singapore.

On 1st May, you issue a cheque for S$25,000 to a local supplier for raw materials. However, the supplier deposits the cheque on 3rd May, and the bank only clears the funds on 5th May.

Even though you paid on 1st May, the money stayed in your bank account until 5th May. That’s 4 days of disbursement float.

2. Collection Float

This is the delay between when your customer pays you and when the money actually hits your account.

3. Net Float

Think of this as your float balance:
Net Float = Disbursement Float – Collection Float

4. Mail Float

Still collecting payments by post or courier? The time those cheques spend in transit is mail float.

5. Processing Float

Once a payment is received, how long does your team take to process it, record it, prepare deposits, and get approvals? That’s processing float.

6. Availability Float

Even after a deposit is made, banks might take a day or two before the funds are available.

Calculating Cash Flow

Let’s be real. Keeping your business running without scrambling for actual cash at the worst moment takes effective planning. And that’s where cash float comes in. The buffer keeps your lights on, your team paid, and your operations moving, especially when customer payments run late.

Here’s how to figure out exactly how much float you need:

Step 1: Get Clear on Your Monthly Essentials

To begin, please list the essential expenses that must be covered:

• Salaries.
• Rent.
• Utilities.
• Suppliers.
• Loans.
• Insurance.
• Ads or marketing campaigns.

Look back at the last 3 to 6 months. What was your actual spending for each month? Take an average. Let’s say you land at S$90,000 monthly.

Step 2: Look at How Money Comes In

Next up — how do your clients pay you? Right away? 30 days later? 60? Or more?

If you’re always chasing invoices, you’ll need more cash float to tide you over.

It’s not just about how much comes in—it’s about when.

Step 3: Figure Out the Cash Gap

Here’s where the math gets useful

Use this formula:

Cash Gap = Days to Get Paid + Inventory Days - Days You Can Delay Paying Suppliers

Say this is your situation:

• Your customers pay in 45 days.
• You keep 30 days’ worth of stock.
• Your suppliers give you 15 days to pay.

That means:

45 + 30 - 15 = 60 days of cash gap.

Step 4: Do the Final Math

Take your daily expenses (S$90,000 ÷ 30 days = S$3,000/day) and multiply by your cash gap.

S$3,000 × 60 = S$180,000

That’s your magic number. Your cash float should be around S$180,000 to avoid sleepless nights during dry spells.

If you’ve ever had to delay a supplier payment or top-up from your personal account just to cover payroll, you know why this matters. A solid cash float lets you breathe. You will never have to worry about what’s in the cash drawer before you make your next move. Think of it as your financial cushion—small enough to stay lean, big enough to stay safe.

Cash Flow Considerations

Running a business is all about keeping things moving seamlessly. And cash flow is at the heart of it. You need money coming in regularly to pay bills, cover salaries, and keep everything else ticking.

• Keeping track of your cash flow means paying your bills on time and keeping your business afloat without surprises. It also assists you in filling the financial shortfall. For example, if your monthly expenses—rent, staff, inventory—add up to S$30,000, you will want to have enough in your cash float to cover that, especially if you are waiting on payments.
• Using a petty cash float for everyday expenses, like grabbing lunch for the team or topping up the office supplies, is also part of your cash planning.
  Let’s say you run an e-commerce business. You've got orders to fulfil every day, but payments from marketplaces or customers come in once a week. Meanwhile, you spend around S$1,000 daily on packaging, same-day delivery, or restocking fast-moving items. That means you would need a buffer of about S$7,000 to keep things from stalling. This float helps you bridge that timing gap, ensuring you don't run out of money when you have work and bills to pay.
• When you manage your cash balances well, you avoid the stress of having too much money sitting idle or, worse, not enough to cover the basics. That’s where cash float management really helps.

The key is understanding the timing between when money leaves and when it comes in. This gap—known as net float—can make or break your business if you're not paying attention.

Cash Float Management and Operational Efficiency

One thing you cannot overlook in a business is operational efficiency. Without it, your business might struggle to stay afloat when unexpected costs pop up. That’s where a solid cash float comes in.

This is how a well-maintained cash float makes your business's operational efficiency seamless:

• Ensuring Funds Are Always Available: A steady cash float ensures you have enough to pay for daily expenses without constantly stressing over the bank balance.
• Streamlining Cash Transactions: With a dedicated cash float on hand, tracking your cash balances becomes much easier. Whether you pull cash from your bank account or keep it in a cash drawer, you clearly know how much is available. It makes handling those minor but frequent transactions stress-free.
• Limiting Access to Cash: Not everyone in your team should have access to the cash float. By keeping it under control, you are reducing the chance of mismanagement.
• Secure Storage is Key: It is about keeping a cash float safe. Whether you store it in a secure cash drawer or your bank account, you will want to know where your money is at all times. The more secure and organised your float is, the smoother your operations will run.

When your operational efficiency is optimal, you are better prepared to navigate the daily grind without unnecessary disruptions. With a reliable cash float to back you up, you will be confident to move forward without stressing about where the next dollar is coming from.

Secure Storage and Handling of Cash Float

Daily cash transactions can get messy if the cash float is not properly managed. Secure storage and handling of cash are critical for your day-to-day operations.

A little structure goes a long way.

• Have a separate company's bank account: Never mix business and personal cash. Keep a separate banking account for business purposes and ensure only authorised personnel have access. All the payments for the small expenses should be made via this account.
• Keep a track: Allocate a fixed amount for daily small expenses like top-ups or urgent supplies. Never forget to log every use. Always keep track of the bank account balance.
• Secure nightly storage: Never leave cash in the till. Ensure that it is transferred to a safe or deposited into your bank account daily.
• Maintain a steady cash float: No matter how big or small your cash float is, ensure it is topped up regularly to manage transactions smoothly.
• Separate floats for separate outlets: If there are multiple outlets, each location should have its own cash float to reduce confusion and track net float across operations easily.

What is Credit Card Float

Credit card float is the gap between spending and paying. You purchase something today, but the money gets debited from your account later, usually after 20 to 60 days, depending on your card’s billing cycle and grace period.

How does it function

Let’s say you buy office supplies for S$1,000 using your business credit card on May 1st. Your billing cycle ends on May 31st, and the payment is due June 20th.

That gives you 50 days before you actually pay the bill. This gap is called your credit card float. This means you can use the supplies and generate revenue from them before actually paying for them.​

Leveraging Credit Card Float

Improved Cash Flow:

• By utilising the credit card float, you can delay cash outflows, allowing your business to use funds for other immediate needs.​
  Interest-Free Period:
  If you pay off your credit card balance in full by the due date, you can enjoy an interest-free period, effectively borrowing money at no cost.​

How Aspire Supports Your Cash and Credit Float

Keeping your cash float and credit float in check doesn’t have to be a daily headache. That’s where Aspire comes in. It’s built for businesses like yours, helping you stay on top of your cash, payments, and expenses without drowning in spreadsheets. You see what’s coming in, what’s going out, and what needs your attention—all in real time, all in one place.

With the Aspire Business Account, you don’t need to worry about minimum balances or sneaky charges eating into your float. If your business sells online, it's worth checking out these four ways to optimise payment gateway features and boost conversions. Faster checkouts and smoother payment flows don’t just help your customers—they help your cash flow too.

With Aspire's Corporate Card, you can set team limits so no one goes overboard while earning cashback while you’re at it. If you’re wondering which card suits your team best, Aspire’s guide on popular types of corporate cards in Singapore breaks it down clearly.

Need to pay vendors on time, every time? Bill Pay does that for you, and Receivables chases late payments automatically so you don’t have to. Everything from reimbursements to vendor payments is handled through Spend Management, so you’re always in the loop. And if you need a little extra fuel during peak months, the Credit Line is flexible, fast, and matched to your cash flow.

Aspire serves as a comprehensive solution for small and medium-sized enterprises, serving as the financial operating system for contemporary businesses. So, why wait? Open an account right away!

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