The credit card offers that appear on this site are from credit card companies from which MoneyCrashers. This compensation may impact how and where products appear on this site, including, for example, the order in which they appear on category pages. Advertiser partners include American Express, U. Bank, and Barclaycard, among others. Without the proper amount of cash on hand, both of these entities can run into major trouble, and even be forced into bankruptcy.

Businesses must have cash on hand for various reasons, such as investing in new infrastructure and dealing with unexpected expenses. A company may have all the revenue in the world, but without the ability to generate cash, it can easily fail. The same can be said for consumers.

Many business analysts state poor cash management practices as the number one reason why businesses go bankrupt.

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Here are some of the key advantages of cash for any business:. Cash Flow For any company to survive, cash flow is the single most important financial factor. A company could have fantastic revenue, reasonable expenses, and significant income, but if its financial operations are not designed efficiently, it could still have negative cash flow. And without positive cash flow, any company, no matter how promising the business model, will go bankrupt. Of course, if a business has just been launched, it may be able to endure negative cash flow in the short-term in hopes of achieving long-term success.

But eventually, any company must focus on creating positive cash flow. Without it, a company will not even be able to accomplish the simplest of tasks: Capital Expenditure Investments To grow, a company often will need to invest in factories, real estate, machinery, or technology.

These are typically one-time costs that require significant funds. Without cash on hand, a business may not be able to make these necessary investments and, as a result, may never be able to experience company growth.

Sure, a business can take out a loan, but even a loan will generally require a significant down payment, which will in turn require that the company have access to cash.

Company Acquisition One popular way for companies to expand is to acquire other companies, either within their niche or as a way to branch out into new areas. Consider these real life examples: Disney and Pixar, Exxon and Mobil, and eBay and PayPal. All of these acquisitions have one thing in common — cash.

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Without the necessary cash, these companies would never have been able to jump on the once-in-a-lifetime opportunity to buy a valuable company at a reasonable price.

Dividends and Share Repurchases Two key ways that public companies reward their shareholders is through dividends and share repurchases. By instituting a share repurchase plan, each remaining share will become more valuable. However, neither dividends nor share repurchases would be options for a public company without cash.

Survival During Down Economies Every company is going to have periods when things are not running at full potential. Without cash on hand, that company would be forced to drastically downsize its employee operations and may even have to declare bankruptcy in order to pay off its fixed expenditures. With cash, the company will be more flexible and better able to survive the downturn. Emergency Preparation Like individuals, businesses face emergencies where they need to pay expenses right away.

These include legal fees and unexpected costs associated with natural disasters. Cuts Transaction Costs Small businesses need to keep their expenses as low as possible. One way to do so is to avoid electronic transaction systems including services like wire transfers and PayPal, which often charge excessive fees.

By paying with actual cash, businesses can cut back on these fees, which can significantly reduce their costs and increase their bottom line profits, leading to…more cash!

Helps Businesses Expand in the Absence of Loans Many small businesses have had to learn the hard way that lenders are becoming more thrifty with how they loan money. If a business has cash available, it can better take advantage how to turn paypal money into real cash opportunities to expand and make important acquisitions — options that may otherwise not be available in the absence of loans.

Pay Bills Faster Particularly for smaller business, cash can be essential for paying bills. Not only do some creditors only accept cash, but other forms of payment can take longer to process, leading to unnecessary late fees. In those cases, paying in cash is the preferred method. While cash is essential for the survival of any business, it is also extremely important to the individual consumer and household for a variety of reasons:.

A year treasury bond provides a much higher interest rate than one with a six-month maturity, but your money is tied up for 10 years assuming you bought it when it was first issued. The advantage of cash is that you can spend it however and whenever you want.

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For example, you need to sell all of these items for cash before you can use the proceeds. This process can take time and the price you sell for is subject to whatever the market will bear.

Because you are at the mercy of the market, these investments can lose value. Moreover, in economic times of volatility, the likelihood of such losses rises substantially. Cash, unlike the best of stocks, will maintain its value even during a stock market crash. Emergency Reserves Situations where you may need a reserve include medical or dental emergencies not covered by health insurance, damage to your home or vehicle, and possible legal issues. Having physical cash on hand or money in a checking account allows you to pay for unexpected expenses without reaching for a credit card and incurring high interest debt.

Ability to Make Large Purchases Increasingly, cash is becoming necessary for how to turn paypal money into real cash purchases like a home or car. Not only will cash give you a leg up on other potential buyers for top hyip money earn daily profit investments dream home, but even if you take out a loan, lenders are beginning to require higher down payments.

Without the necessary cash on hand, you may not be able to make that important purchase. Another advantage is that if an investment opportunity presents itself, you have the means to immediately invest.

Without this, you would either be forced to sell shares of other investments, perhaps at a time when the market is down, or forgo the investment opportunity altogether. Cash-Only Transactions Some businesses, such as certain restaurants and taxis, will not accept credit cards, debit cards, or checks. Many small retailers also issue a surcharge on small purchases. Hackers Remain a Threat Hackers have been a significant threat to investors for years.

Financial institutions such as PayPal and Citibank have even been targets. Give yourself peace of mind and keep some of gun stock market symbols money in a safe where it can always be accounted for.

Deflationary Periods During a deflationary period, you have to worry about banks failing or stocks and bonds losing value. Luckily, there is no such worry with cash, which will increase in value in a deflationary period. By having es binary options trading system cash on hand, you can ensure that you will enjoy at least some gains in your portfolio should a deflationary period take hold of the economy.

Avoid Interest and Fees Taking out a loan or running into debt on your credit card will force you to pay high interest rates and fees. You also free yourself of the stress associated with making monthly payments on different purchases and credit cards. Costs May be Higher than Expected One of the common problems consumers face is that estimates for large projects are often higher than expected.

With a few hundred dollars of available cash, you will be able to make the necessary payment. Whether you are a business or an individual, make sure you prioritize the importance of cash.

For a business, its availability is essential to not only avoid the possibility of bankruptcy, but also to take advantage of various expansion and growth opportunities. As a consumer, cash represents one of the safest investments possible while preparing you for uncertain times.

InvestingMoney ManagementSmall BusinessSpending and Saving. Kalen Smith has written for a variety of financial and business sites. He is a weekly contributor for Young Entrepreneur and has worked as a guest blogger on behalf of Consumer Media Network.

He holds an MBA in finance from Clark University in Worcester, MA. Sign up below to get the free Money Crashers email newsletter! The content on MoneyCrashers. Should you need such advice, consult a licensed financial or tax advisor. References to products, offers, and rates from third party sites often change. While we do our best to keep these updated, numbers stated on this site may differ from actual numbers.

We may have financial relationships with some of the companies mentioned on this website. We strive to write accurate and genuine reviews and articles, and all views and opinions expressed are solely those of the authors.

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Spend More for High Quality or Buy Cheap to Save Money? Share Tweet Pin 1 Comments Why Businesses Need Cash Many business analysts state poor cash management practices as the number one reason why businesses go bankrupt. Here are some of the key advantages of cash for any business: Why Individuals Need cash While cash is essential for the survival of any business, it is also extremely important to the individual consumer and household for a variety of reasons: Final Word Whether you are a business or an individual, make sure you prioritize the importance of cash.

What are your thoughts on cash and its importance to both businesses and individual consumers?

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