Cash Forecasts
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. You're level 1. You can read and practice here now.
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
- Start with opening cash.
- Add the cash receipts, the money actually collected.
- Subtract the cash payments.
worked 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
- 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
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
- 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
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
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.
practice
Ending cash
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
- Opening + receipts − payments = $6,000 + $15,500 − $7,500 = $14,000.
Roll forward several weeks
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
- Each week's ending cash is the next week's opening: $37,000, $39,000, $44,000, then $42,000.
The tightest week
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
- Week-end balances: $8,000, $1,000, $7,500, $11,000.
- 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
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
- 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.
- No sale is lost or created; only the timing changes.