Cash Buffer
Short definition
A cash buffer is the reserve held above the minimum-cash floor for shocks and forecast error. It is held for payment continuity, not for yield maximisation.
Detailed explanation
Size it off collection volatility, customer concentration, FX and rate shocks, and how flexible the line is. A drawable RCF can be part of the buffer; a covenant squeeze deletes that part.
The buffer is not trapped cash or cash blocked as collateral. Yield-hunting must not lock the buffer in deposits that cannot fund the 13-week payroll.
Why it matters for the CFO
In a stress test the buffer breaks first, then the line, then the covenant. High rates raise the opportunity cost of holding a buffer; zeroing it raises refinancing risk.
How to read it
Buffer / monthly outflow is shock days; there is no universal day rule. An “X% of sales” rule misleads in seasonal businesses. Report the in-facility buffer and the cash buffer separately.
Numerical example
Minimum cash 45 mn TL, policy buffer 20 mn TL → target cash floor = 65 mn TL. Cash 80 mn TL → free surplus = 15 mn TL.
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What to learn next
Definitions are educational. They are not investment, credit or tax advice.