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- Playbook: Don’t run out of cash
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Hi folks!
Every week, I’m sharing a practical, hands-on guide on one way to run your small business better.
(It’s what we do every day in Scalepath, my community for SMB CEOs — discussions, calls, playbooks, cohorts, and more. Join us!)
Today’s topic: using a cash flow forecast to keep your business afloat
I gave some tips recently on how much cash to keep in your business.
But no matter how well you plan things, you’re bound to run into a cash crisis sooner or later.
When that happens, you have three essential jobs as CEO.
Fix the problem that got you into this mess.
It could be anything. (Have you got a specific problem? Write me and maybe I’ll do an issue about it!)
Get hands-on with your balance sheet.
Use this template to build a 13-week rolling cash flow forecast. (Walkthrough below.)
Stretch your cash.
Now that you’ve gotten intimate with your finances, find yourself some wiggle room.
- Delay payments
- Renegotiate w/ vendors
- Expand borrowing
- Raise cash
- Get paid early
- Etc.
This is how you buy time to fix the problem.
How to use the template
Here’s the Excel file again (it’s a spreadsheet, so not great for mobile).
Using it is pretty simple. Fill in the numbers in blue. Everything in black is calculated automatically.
Enter this Monday’s date at the “1”.
Fill in your current starting cash on hand, and what’s coming in this week.
List your expenses for the week from operations — rent, salaries, fees, loan payments, the works.
See your weekly cash increase/decrease at the bottom.
Add any new invoices and estimated collections for that week. These are often on terms (like net 30) so forecast when they’ll be paid.
That’s it! Do this at the top of each week to stay in touch with the numbers that matter.
Why 13 weeks?
If your business is in trouble, monthly or quarterly cash flow projections are too general.
13 weeks is short enough to be precise. Your estimates will be accurate enough to be useful. And it’s long enough to see your problems while you still have time to fix them.
Can’t my accounting software do this?
Probably. But a lot of accounting tools have either dirty or incomplete data.
Plus, there’s something visceral about entering these numbers yourself. Touching your data is touching your business.
Try it and you’ll know what I mean.
—
That’s it!
Have a great week,
Michael
P.S. Every business leader needs people to confide in. But only other leaders really “get it.”
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