To find it, add each day's closing balance for the period and divide by the number of days. Funders read it alongside monthly deposits. Strong deposits with a very low average balance suggest that money leaves as fast as it arrives.
It also helps size a payment. A daily debit that is large next to your average balance leaves little room for a slow week.
Example: In a 30-day month with 10 days at $8,000, 15 days at $3,000 and 5 days at −$500, the average daily balance is $4,083.33. The 5 days below zero also count as negative days.
Some underwriters use the average of daily balances, and others focus on the lowest point in each month. If your balance swings widely, ask which one a funder uses.