Weekly Cash Forecasting That Actually Works (From My Desk)

Why I forecast weekly

Monthly forecasts are too slow when cash is tight. I run a weekly forecast that focuses on reality: collections timing, payroll, rent, and large vendor payments. In today's fast-paced business environment, cash positions can change dramatically within a few days, making weekly forecasting essential for maintaining liquidity and avoiding cash flow crises.

The model I use

• Starting cash: bank balances + known settlement delays (processors, ACH, etc.). I include all available cash across all accounts, including pending deposits and uncleared checks.
• Known outflows: payroll, taxes, rent, debt service, and committed POs. I categorize these by timing and priority to understand immediate cash needs.
• Expected inflows: AR by customer with conservative collection assumptions. I analyze historical collection patterns and current customer financial health to estimate timing.
• Scenario toggle: base / cautious / worst-case. This allows me to plan for different outcomes and prepare contingency plans.

Detailed cash flow components

Operating cash flows:

• Customer collections: Based on aging reports and historical collection patterns
• Vendor payments: Scheduled payments for goods and services received
• Payroll and benefits: Salaries, wages, taxes, and benefit contributions
• Tax payments: Federal, state, and local tax obligations
• Insurance premiums: Regular premium payments and deposits

Investing cash flows:

• Capital expenditures: Equipment purchases and facility improvements
• Investment activities: Purchases or sales of investment securities
• Acquisitions: Any business or asset acquisitions

Financing cash flows:

• Debt service: Principal and interest payments on loans
• Credit facility draws: Borrowing against available credit lines
• Equity transactions: Issuance or repurchase of equity

Forecasting methodology and assumptions

I use a combination of historical analysis and forward-looking indicators:

Collection assumptions:

• Current: 95% collected within 30 days
• 30-60 days: 80% collected within 30 days
• 60-90 days: 60% collected within 30 days
• Over 90 days: 30% collected within 30 days

Payment timing:

• Net 30 terms: 70% paid on time, 30% paid within 60 days
• Net 60 terms: 80% paid on time, 20% paid within 90 days
• Immediate payments: 100% paid as scheduled

Technology and tools for cash forecasting

I leverage various tools to enhance accuracy:

• ERP integration: Direct connection to accounting systems for real-time data
• Bank feeds: Automated import of actual cash positions
• AR aging reports: Detailed customer payment history
• AP scheduling: Visibility into upcoming payment obligations
• Dashboard reporting: Visual representation of cash positions

Weekly forecasting process

Monday: Update forecast with weekend transactions and any new information Tuesday: Review with operations team for any changes in customer or vendor behavior Wednesday: Finalize forecast and share with leadership Thursday: Begin planning for next week's cash needs Friday: Document lessons learned and update assumptions as needed

Managing cash flow volatility

I prepare for various scenarios:

Conservative scenario: 20% slower collections, 10% higher expenses Base scenario: Historical patterns continue Optimistic scenario: 15% faster collections, 5% lower expenses Crisis scenario: 50% slower collections, immediate payment requirements

Communication and reporting

I create weekly reports that include:

• Current cash position vs. forecast
• Variance analysis from previous forecast
• Key assumptions and changes
• Risk factors and mitigation plans
• Action items for management review

Cash management strategies

Based on forecast results, I implement:

Short-term strategies:

• Accelerate collections through early payment discounts
• Negotiate extended payment terms with vendors
• Utilize credit facilities when needed
• Optimize cash pooling across entities

Medium-term strategies:

• Optimize working capital components
• Evaluate seasonal cash flow patterns
• Plan for major cash needs in advance
• Establish backup financing options

Risk management in cash forecasting

I identify and monitor key risk factors:

• Customer concentration risk: Over-reliance on a few customers
• Industry risk: Economic factors affecting customer payment ability
• Seasonal risk: Periodic variations in cash flows
• Operational risk: Unexpected expenses or delays

Integration with financial planning

Cash forecasting connects with broader financial planning:

• Budgeting: Monthly forecasts align with annual budget assumptions
• Strategic planning: Long-term cash needs inform strategic decisions
• Performance metrics: Cash conversion metrics tied to operational KPIs
• Risk management: Cash reserves aligned with business risk profile

Continuous improvement process

I regularly refine the forecasting process:

• Accuracy tracking: Monthly comparison of forecasts to actual results
• Assumption updates: Regular review and adjustment of collection assumptions
• Process improvements: Streamlining data collection and analysis
• Technology upgrades: Leveraging new tools and capabilities
• Training and development: Staying current with best practices

Stakeholder communication

I ensure the right people receive appropriate information:

• Executive team: High-level cash position and significant changes
• Operations: Customer and vendor payment information
• Treasury: Detailed cash positioning and financing needs
• Accounting: Support for cash-related journal entries
• Board: Cash position updates for governance purposes