Guide
Separate cash-flow assumptions from facts in a scenario model
A cash-flow forecast mixes facts, such as the cash in the bank, with assumptions, such as growth and payment dates. Label which is which, then test the assumptions in scenarios.
The short answer
Mark every input as a fact (cash today, signed contracts, fixed commitments) or an assumption (growth rates, payment timing, grants not yet confirmed). Build a base case and a downside that cuts receipts, find the month cash would run out, and check that every month reconciles: closing cash equals opening cash plus receipts, minus payments, plus one-off items.
Facts and assumptions
Facts: cash today, contracted receipts and fixed payments with their dates.
Assumptions: growth, how quickly customers pay, grant instalments not yet confirmed in writing, cost increases.
Most forecasting errors come from treating the second list as if it were the first.
Scenarios, not a single forecast
Build a base case, a downside and an upside. The downside matters most: it shows how much room you have if receipts come in lower or later than planned.
A worked example
The illustrative example in the cash flow forecast template is a small services firm with USD 42,000 in the bank, paying out more each month than it receives at the start. In the base case cash stays positive for all 18 months, but its lowest point, about USD 27,400, comes in month 5, just before a USD 25,000 grant instalment arrives. If receipts are 20% lower, cash runs out in month 11.
The grant’s timing is an assumption the whole plan depends on. Until the agreement fixes the date, treat it as one.
Reconcile every month
Each month’s closing balance must equal its opening balance plus receipts, minus payments, plus one-off items, and the next month must open at that figure. A model that does not reconcile cannot be trusted, however polished it looks.
Act on the runway
If the downside runs out of cash inside your planning horizon, decide now what you would do: bring receipts forward, defer payments or arrange funding.
What this guide does not cover
A model of your assumptions, not a prediction and not regulated financial advice. Late payers and lumpy costs move runway more than monthly averages show.
Responsible for this guide
Examples in this guide are illustrative, not client results. Figures come from the free tool’s worked example; change the inputs in the tool to see your own.
Related service
The same method, delivered with you: scoped in writing, with a named principal and a fee agreed before any work begins.
What needs to move forward?
Tell us the decision, the challenge or the opportunity. We reply with a scoped approach, a named principal and a fee before any work begins.
No charge to submit an enquiry.