courses › Business Stats & Decisions

Cash Forecasts

level 28 course

Roll cash forward week by week and find the tight spots before they arrive.

Pen and paper is fine · no calculator needed why?

Opens at level 28.

Builds on: Profit Is Not Cash (not open yet)

the lesson

The idea, the techniques and a tip for each skill, right here. The Learn page adds worked examples for every skill and untimed practice.

Read the lesson · about 3 minutes

The idea

A cash forecast rolls the bank balance forward. Opening cash, plus the cash you expect to receive, minus the cash you expect to pay out, gives closing cash. Each week's closing cash is the next week's opening.

Count cash when it actually moves, not when you send an invoice. A profitable month can still run short if customers pay late.

Forecast week by week, because the danger is often in the middle: a period that ends fine can dip below zero on the way.

Techniques

Opening plus in, minus out

Closing cash for one period.

Start with opening cash.
Add the cash receipts, the money actually collected.
Subtract the cash payments.

worked example

Example: A bakery opens the month with $2,500 of cash, collects $7,000 from customers and pays out $8,500. What is closing cash? (Use a minus sign if negative.)

$2,500 + $7,000 − $8,500 = $1,000.

Answer: $1,000

Roll forward, week by week

Several weeks of receipts and payments.

Each week's closing cash is the next week's opening.
Write down every week-end balance, not only the last.
The last is cash at the end. The lowest is the week to plan for.

worked example

Example: A print shop opens with $4,000. Weekly receipts: $3,000, $1,000, $5,000. Weekly payments: $2,000, $4,500, $1,500. What is the lowest week-end cash balance? (Use a minus sign if negative.)

Week 1: $4,000 + $3,000 − $2,000 = $5,000.
Week 2: $5,000 + $1,000 − $4,500 = $1,500.
Week 3: $1,500 + $5,000 − $1,500 = $5,000.
Lowest: $1,500, at the end of week 2.

Answer: $1,500

Move the receipt

A customer payment arrives a week later than forecast.

Take the payment out of the week it was expected.
Add it to the week it now arrives.
Nothing is lost; only the timing changes.

worked example

Example: Week 2 is forecast to end with $5,000. A $6,500 customer payment slips from week 2 to week 3. What is the new week-2 ending cash? (Use a minus sign if negative.)

$5,000 − $6,500 = −$1,500.
Week 3 gets the $6,500, so it ends where it was.

Answer: −$1,500

Tips by skill

TipEnding cash: Opening cash plus receipts minus payments. Only cash that actually moves counts.
TipRoll forward several weeks: Carry each week's closing cash forward as the next week's opening, one week at a time.
TipThe tightest week: Work out every week-end balance, then pick the smallest. It can be negative.
TipA customer pays late: Take the late payment out of week 2; it lands in week 3 instead. Nothing is lost.

Watch out for

Adding the payments instead of subtracting them. Cash paid out comes off the balance.
Using invoiced sales as receipts. Count cash only when the customer actually pays.
Looking only at the final week. A forecast that ends fine can dip below zero in the middle.
Treating a late payment as lost, or adding it to the week it left. It moves; it does not vanish.

skills · practice stats

From rounds of this course only: box, review and test-out answers are left out. Once a skill has 40 tries, it compares your first 20 tries with your last 20.

Ending cash par 12 s not tried yet
worked example
Opening cash is $6,000, cash receipts are $15,500, and cash payments are $7,500. What is closing cash? (Use a minus sign if negative.)

Answer: $14,000.00
1. Opening + receipts − payments = $6,000 + $15,500 − $7,500 = $14,000.
Roll forward several weeks par 25 s not tried yet
worked example
Opening cash is $35,500. Weekly receipts: $7,500, $7,500, $9,500, $0. Weekly payments: $6,000, $5,500, $4,500, $2,000. What is cash at the end of week 4? (Use a minus sign if negative.)

Answer: $42,000.00
1. Each week's ending cash is the next week's opening: $37,000, $39,000, $44,000, then $42,000.
The tightest week par 30 s not tried yet
worked example
Opening cash is $2,500. Weekly receipts: $6,000, $500, $7,000, $7,500. Weekly payments: $500, $7,500, $500, $4,000. What is the lowest week-end cash balance? (Use a minus sign if negative.)

Answer: $1,000.00
1. Week-end balances: $8,000, $1,000, $7,500, $11,000.
2. The lowest is $1,000, at the end of week 2: the week to watch, even though cash is back up to $11,000 by the end.
A customer pays late par 21 s not tried yet
worked example
Week 2 is forecast to end with $42,500. A $4,500 customer payment slips from week 2 to week 3. What is the new week-2 ending cash? (Use a minus sign if negative.)

Answer: $38,000.00
1. Move the receipt, don't delete it: week 2 drops by $4,500 to $38,000, and week 3's receipts rise by the same $4,500, so by the end of week 3 the cash is back where it was.
2. No sale is lost or created; only the timing changes.

rest ladder

Win 3 of your last 4 rounds and the course rests. A win is 90% right, within 2× the round's par. Pass the review when it comes back and the next rest is longer.

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