Build a cash runway forecast you can act on

Why a cash forecast matters

A product can show a profit on paper and still run short of cash: customers may pay late, a processor may settle after a delay, or an annual bill may arrive before the revenue meant to cover it. A forecast is a decision tool, not a promise about the future. It helps you see which assumptions create a cash gap while there is still time to change spending, timing, or the offer.

The U.S. Small Business Administration recommends financial projections and says first-year projections can be quarterly or monthly in a funding-plan context. It also describes bookkeeping as a way to track assets, liabilities, available cash, and operating costs. Those sources are U.S.-oriented; the simple model below is an operating aid, not a substitute for required accounting statements or local tax records.

Make a 12-month monthly model

Start with a spreadsheet. One column per month is enough for a stable early business. If cash is tight or receipts are irregular, use a rolling 13-week forecast by week as well; monthly totals can hide a short-term gap.

For each month, calculate:

Opening available cash
+ customer cash expected to arrive during the month
- refunds and payment reversals expected
- operating bills paid during the month
- tax, debt, payroll, and other committed payments
- owner withdrawals or compensation planned
= Closing available cash

The next month’s opening cash equals this month’s closing cash. Keep a separate list of amounts that are not actually available to spend: taxes collected for remittance, restricted grant funds, processor reserves, unpaid invoices, and customer prepayments tied to future delivery. How you classify those amounts for accounting purposes depends on your accounting method and jurisdiction; this forecast is about cash timing.

Gather the inputs before choosing a growth story

Use bank and processor statements for the starting cash and actual settlements. Then list each expected inflow by the month it is likely to land, rather than the date an invoice is issued. For subscriptions, use current active customers and observed cancellations; do not treat every trial, lead, or unsigned proposal as cash. For business sales, include a conservative payment delay based on actual terms and collection history.

List outflows from bank records, contracts, invoices, renewal notices, and tax or debt schedules. Include:

• fixed software, hosting, insurance, accounting, and professional-service bills;
• transaction fees, usage-based infrastructure, contractors, and fulfillment costs that rise with sales;
• annual renewals, equipment, launch work, and other one-time purchases in the month they are due;
• payroll or contractor commitments, owner compensation, loan principal and interest, and tax payments;
• refunds, chargebacks, processor reserves, and a realistic allowance for unexpected costs.

Use the contribution-margin worksheet to estimate costs that move with each sale. A positive contribution margin does not mean the business has enough cash: fixed costs and timing still matter.

Build three scenarios, not one precise forecast

Make a base case from recent evidence, then change only a few important assumptions in a downside case. For example: renewals are lower, a large customer pays a month late, and a refund or annual hosting bill lands in the same period. An upside case is useful for capacity planning, but do not use it to justify commitments that only work if growth arrives.

Record each assumption beside its number: source, date checked, and what would change it. For example, “new customers: 4/month; based on the last 3 months; revisit after the next 20 qualified demos.” When evidence is thin, model a range instead of adding decimal precision.

Month	Opening cash	Receipts by expected settlement	Refunds and reversals	Committed and variable outflows	Closing cash	Assumption to recheck
Oct
Nov

Turn the lowest point into a decision

Find the lowest projected closing balance in each scenario and the month it occurs. Compare it with the minimum cash you need for obligations you cannot defer. Do not label a number of months as “runway” from cash divided by one recent month’s burn unless receipts and costs are stable; that shortcut can badly mislead a seasonal, growing, or lumpy business.

Instead, ask:

1. In which month does the forecast first fall below the minimum available-cash floor?
2. Which assumptions or obligations create the gap?
3. Which changes are within your control, and how long do they take to affect cash?
4. What customer or delivery harm could each change cause?
5. What is the latest date to act while there are still options?

Possible actions include pausing discretionary spend, renegotiating a renewal before its deadline, narrowing the offer to reduce delivery cost, collecting overdue invoices, adjusting payment timing transparently, or seeking qualified financing advice. Do not count hoped-for investment, uncommitted credit, or customer prepayments as available runway until the money and delivery obligations are understood.

Review on a cadence that matches the risk

Reconcile actual bank and processor settlements monthly and replace estimates with actuals. Reforecast after a large customer win or loss, a pricing change, a new recurring commitment, a refund spike, or a change in payment terms. When the forecast approaches the cash floor, review weekly and use the shorter 13-week view.

For bookkeeping method, tax treatment, solvency, employment, or legal duties, use official guidance for the places where the business and its customers operate and consult a qualified local professional when decisions have material consequences. See business basics, contribution margin, and payments and subscriptions.