Matrixx0070 Cash Flow Forecast
When to use
Use this to project short-term liquidity, answer "will we make payroll / cover this quarter," or build a rolling 30/60/90-day cash forecast from receivables, payables, and known fixed outflows.
Not for: the historical indirect-method cash flow statement in a reporting package (fin-financial-statements), or actual-vs-plan variance on cash (fin-variance-analysis). This is forward-looking liquidity planning.
Method
- Set the starting position. Record today's cash balance, the forecast start date, and any minimum-cash covenant or comfort floor.
- Project inflows. From AR aging, schedule expected collections by expected pay date. Decision point: apply collection-probability haircuts by aging bucket (current ~95%, 30–60 ~80%, 90+ ~50%) — do not forecast overdue invoices at face value. Add other known inflows (financing, deposits).
- Project outflows. From AP aging and payment terms, schedule disbursements; add recurring fixed outflows (payroll, rent, debt service, taxes) on their due dates.
- Bucket into 30/60/90. Roll inflows and outflows into three periods; compute net cash flow and a running ending balance per bucket.
- Flag risk. Decision point: mark any period where ending balance breaches the floor or goes negative; record shortfall size and the exact date it hits.
- Model levers. Show the effect of accelerating collections, delaying payables, or drawing a credit line.
- Recommend actions. Prioritize the levers that close the gap with the least disruption.
Example
Start cash $220k, floor $150k. Days 0–30: inflows $310k (AR, haircut-adjusted), outflows $360k (incl. $180k payroll) → net −$50k, ending $170k (above floor). Days 31–60: inflows $280k, outflows $340k → net −$60k, ending $110k — breaches $150k floor on day ~48, shortfall $40k. Lever: pull a $90k invoice from a current-bucket customer forward 15 days (accelerate collection) → day-48 balance back to $170k. Recommend that plus deferring a $30k non-critical payable one cycle as backup.
Pitfalls
- Forecasting overdue AR at face value. 90+ invoices rarely pay in full or on time — haircut them or you overstate liquidity.
- Missing fixed, non-invoice outflows. Payroll, taxes, and debt service don't appear in AP aging; add them explicitly.
- Netting away timing. A month that nets positive can still go negative mid-period if a big outflow lands before the inflow — track the running daily/weekly balance, not just the bucket total.
- Ignoring the floor until it's breached. Model levers before the shortfall date, not after.
Output format
Starting cash: <$> | Start date: <...> | Minimum floor: <$>
Forecast:
| period (30/60/90) | inflows | outflows | net | ending balance |
Inflow detail: | source/customer | amount | expected date | probability |
Outflow detail: | payee/category | amount | due date |
Risk flags: | period | shortfall $ | date floor breached |
Levers: | action | cash impact | timing |
Recommended actions (prioritized): <...>
Reference
The 13-week cash-flow model (layout)
The 13-week direct-method forecast is the treasury standard for short-term liquidity. Columns = 13 weeks (a rolling quarter); rows = receipt and disbursement categories. Every week computes net flow and a running ending balance carried into the next week.
| Row | Detail |
|---|---|
| Beginning cash | = prior week ending cash (week 1 = today's actual balance) |
| Receipts | |
| AR collections | From AR aging, scheduled by expected pay date × collection probability |
| Other inflows | Financing draws, tax refunds, asset sales, customer deposits |
| Total receipts | Sum of inflows |
| Disbursements | |
| AP / vendor payments | From AP aging + terms, by due date |
| Payroll | Every pay cycle (semi-monthly/bi-weekly) — largest recurring outflow |
| Rent / lease | Monthly, on due date |
| Debt service | Principal + interest per amortization schedule |
| Taxes | Payroll, sales, income estimated payments on statutory dates |
| Capex / other | Planned equipment, one-offs |
| Total disbursements | Sum of outflows |
| Net cash flow | Receipts − disbursements |
| Ending cash | Beginning + net flow |
| Minimum floor | Covenant or comfort floor (constant line) |
| Headroom | Ending cash − floor (flag if negative) |
Weeks 1–4 should use near-actual, known items (high confidence); weeks 5–13 rely more on modeled patterns. Roll the model forward each week: drop the completed week, add a new week 13, and reconcile last week's forecast vs. actual to calibrate.
Collection-probability haircuts (AR by aging bucket)
Never forecast overdue AR at face value. Typical assumptions (tune to your own collection history):
| Bucket | Collection probability | Expected timing |
|---|---|---|
| Current (not yet due) | ~95% | On terms |
| 1–30 days past due | ~85% | +1–2 weeks |
| 31–60 days | ~75% | +3–4 weeks |
| 61–90 days | ~50% | Uncertain |
| 90+ days | ~25% or write-off review | Uncertain |
What AP aging misses
Fixed, non-invoice outflows never appear in AP aging — add them explicitly: payroll, payroll taxes, rent, debt service, income/sales tax remittances, insurance, benefits. These are often the largest and most rigid disbursements; missing one is the top cause of a "surprise" shortfall.
Liquidity levers (in order of least disruption)
- Accelerate collections — early-pay discounts, pull large current-bucket invoices forward, factor receivables.
- Delay non-critical payables — stretch to the terms limit (not past — protect vendor relationships and discounts).
- Draw the revolver / line of credit — fast but adds interest and uses covenant headroom.
- Defer discretionary capex.
- Equity / term debt — slowest, for structural (not timing) gaps. Model the lever before the breach date; a lever applied after the floor is breached is a fire drill.
Timing trap and floor discipline
A period that nets positive can still go negative mid-period if a large outflow (payroll) lands before an inflow. Track the running weekly/daily balance, not just the bucket total. Flag the exact date and dollar size of any floor breach. Minimum-cash covenants are often the binding constraint before insolvency — treat the floor, not zero, as the trigger line. Always run a downside scenario (collections slip one bucket, a large customer delays) alongside the base case.