Liquidity reserve
A Liquidity reserve is a cash buffer your business keeps for short-term needs and surprises. It helps you pay suppliers, wages and tax bills on time, even if customers pay late or sales dip. Think of it as money set aside for stability, separate from everyday operating cash.
Keep it simple
Hold your reserve in a separate, instant-access business account so it’s easy to reach but not mixed with daily spending. After you use it, top it back up as soon as cash flow allows.
Hold the reserve in places you can access quickly, such as a current account, instant-access savings, or an agreed overdraft facility you haven’t drawn. Prioritise quick access and low risk over returns. Set a clear target that fits your costs and cash‑flow swings, and use the reserve only for short-term gaps.
When a liquidity reserve helps most:
- Customer payments arrive late and you need to cover payroll and rent.
- Seasonal slow periods reduce cash coming in.
- Unexpected repairs or urgent stock purchases.
- Larger, infrequent bills such as VAT or insurance.
