13 Week Cash Flow Forecasts - The Finance Tool Your Startup Has Been Missing

13 Week Cash Flow Forecasts and How They Will Change Your Business

Cash flow modeling is arguably the most essential tool for startups to forecast and plan their operations. A 13 week cash flow forecast, also known as a “rolling” cash flow forecast, provides insight to help founders make more well informed decisions about their financial trajectory in the immediate term. Right now, financial markets are highly volatile, especially in the venture world. With tougher access to financial markets, accurate and reliable cash flow modeling could be the difference between a startup well-positioned to take market share vs. one that won’t be here 2 years from now.

accurate and reliable cash flow modeling could be the difference between a startup well-positioned to take market share vs. one that won't be here 2 years from now

One of the primary benefits of using a 13 week cash flow model is that it allows startups to anticipate and plan for potential cash flow shortages. By projecting their cash flow on a weekly basis, companies can quickly identify potential shortfalls and take steps to address them before they become a problem. Typically this includes drawing additional equity or debt financing (if available), reducing expenses by lowering your expense items (Auxo or your accounting team can help you find where to look for these), or finding ways to increase revenue (perhaps through collection of outstanding accounts receivable or other immediately available revenue sources).

Another benefit of using a 13 week cash flow model is that it can help startups to better manage their working capital. By understanding their projected cash flow on a weekly basis, startups can make informed decisions about how to allocate their funds and ensure that they have enough cash on hand to meet their short-term obligations. This can include paying bills, salaries, and other expenses, as well as investing in growth opportunities.

Finally, an under-appreciated benefit that we frequently see is that cash flow modeling helps startups build credibility with investors and other stakeholders. By showing that they have a clear understanding of their financial situation and can plan for potential challenges, startups demonstrate their ability to manage investor capital and build sustainable businesses in the long term.

an under-appreciated benefit that we frequently see is that cash flow modeling helps startups build credibility with investors

So, how do I create a 13 week cash flow forecast?

1. Start by gathering all of the necessary financial information. This should include historical financial data, such as income statements and balance sheets, as well as any relevant information about upcoming expenses and revenue streams.
2. Create a spreadsheet with columns for each week of the 13 week period. In the first row, label each column with the corresponding week number.
3. In the second row, enter the projected cash balance at the end of the previous week. This will serve as the starting point for the model.
4. In the remaining rows, enter the projected cash inflows and outflows for each week. Be sure to include all expected sources of cash, such as revenue from sales, investments, and loans, as well as all expected uses of cash, such as expenses, taxes, and debt payments.
5. As you enter the projected cash inflows and outflows, update the projected cash balance for each week. This will allow you to see how your cash balance is expected to change over the 13 week period.
6. Once you have entered all of the projected cash inflows and outflows, review the model to ensure that it accurately reflects your expected cash flow. If any potential issues or discrepancies are identified, make the necessary adjustments to the model.
7. Use the 13 week cash flow model to forecast and plan for potential cash flow shortages. This can include securing additional funding, reducing expenses, or finding ways to increase revenue.

Building an accurate cash flow forecast can be hard work, and there are a lot of variables to account for. If you have any questions about how to best set up your model, or how to think about predicting various revenue and expense items, please don’t hesitate to reach out.