Cash Flow

Start with dates, then reconcile the totals

A business can report profit while a payment week has too little cash. An earned invoice may not be collected yet, inventory can be purchased before it sells, and a customer deposit can arrive before the promised service is delivered. The cash-flow guides follow receipts and payments on their expected dates. They keep sales, expenses, cash movement and balance-sheet amounts in separate columns.

The basic reconciliation is opening cash plus receipts minus payments equals closing cash. If a forecast produces a negative closing balance, that is an unfunded shortfall requiring attention, not a result to hide behind zero. A minimum reserve is a comparison threshold rather than another expense. Subtracting it from both cash flow and the resulting balance would count the same buffer twice.

Inspect the weeks inside the month

The worked weekly schedule starts with $5,000, collects $14,000 and pays $16,000 over a month. It ends with $3,000, yet one week falls to a modeled negative $2,000 before later receipts arrive. This is why a rolling forecast can be more useful than a month-end total when payroll, supplier orders or customer collections are concentrated on specific dates.

Runway is a narrower model. Cash above a chosen reserve divided by positive net burn gives a duration under constant flows. If receipts equal or exceed payments, there is no finite depletion date under those assumptions. That does not eliminate timing risk or one-off costs. The cash-stress calculator moves a stated share of receipts beyond the period and adds a separate payment shock without pretending those receipts are lost revenue.

Separate working capital from available cash

Net working capital subtracts current liabilities from current assets. Inventory and receivables may be assets without being spendable today. The cash conversion cycle describes the timing between inventory, collection and supplier payment; it does not directly calculate a reserve in dollars. Its day measures need consistent periods and denominators, with any use of a purchase-cost proxy disclosed.

Scenario guides then connect price, unit volume, variable costs, capacity and collection timing. Keep an original budget for comparison while updating the forecast with new evidence. Every scenario is conditional on its inputs, and no favorable case is presented as an expected return. Borrowing, personal investments, credit selection and tax recommendations are outside this section.