🧞♂️ New to Exponential Scale? Each week, I provide tools, tips, and tricks for tiny teams with big ambitions that want to scale big. For more: Exponential Scale Podcast | Scalebrate | Scalebrate Hub
Founding Supporters: Support the following people and companies because they support us: DataEI | Dr. Bob Schatz | .Tech Domains | Fairman Studios | Jean-Philippe Martin| RocketSmart AI | UMBC
Want to be a Founding Supporter? Become a supporter and get listed in every Exponential Scale newsletter for a year for just $497! Now’s your chance! You have until Dec. 22, 2025 to become a Founding Supporter and get recognition and gratitude! Sign up here.
In today's newsletter:
Cash Flow Forecasting: Avoid Surprises
End of the month. You check your bank account.
$2,000 left. Payroll is $15,000.
"Where did all the money go?"
You scramble. Delay vendor payments. Pull from personal savings.
This shouldn't be a surprise.
Most founders run their business like checking their speedometer while blindfolded. You only know your cash position when you look.
The fix: Cash flow forecasting. Know exactly how much money you'll have 30, 60, 90 days from now.
Why Cash Flow ≠ Profit
Profit: Revenue - Expenses (on paper)
Cash flow: Actual money in bank account
You can be profitable and still run out of cash.
Example:
January:
Revenue: $50K (invoiced, not collected)
Expenses: $40K (paid immediately)
Profit: $10K ✅
Cash: -$40K (you paid expenses but didn't collect revenue yet) ❌
This is the cash flow gap.
Common causes:
Payment terms (customers pay 30-60 days later)
Upfront expenses (inventory, contractors)
Seasonal revenue (slow months)
Growth (hiring before revenue increases)
Forecasting shows you when the gap hits.
An Example of A Founder Who Almost Ran Out of Cash (But Didn't Know It)
Here’s an example we can work through to show how cash flow works. Let’s say Kevin runs a marketing agency. $50K/month revenue. Business looked healthy.
His approach to cash (Year 1):
Check bank balance when needed
Pay bills as they come
No forecasting
What he didn't see coming:
Month 1:
Invoiced $50K (net-30 payment terms)
Expenses: $40K (payroll, rent, software)
Bank balance: $25K (seems fine)
Month 2:
Invoiced $50K (net-30)
Expenses: $40K
But: Only $30K collected from Month 1 invoices ($20K still outstanding)
Bank balance: $15K (starting to worry)
Month 3:
Invoiced $50K (net-30)
Expenses: $40K
Collections: $35K from Month 2
Bank balance: $10K (panic mode)
Payroll due in 5 days: $25K
Cash shortfall: $15K
Kevin almost missed payroll.
His solution: Cash flow forecasting
He built a simple 90-day forecast showing:
Money coming in (by collection date, not invoice date)
Money going out (all expenses)
Running cash balance
After implementing:
Saw cash crunch coming 60 days ahead
Adjusted payment terms (net-15 instead of net-30)
Set up line of credit as backup
Never came close to missing payroll again
Kevin's insight:
"Revenue looked great on paper. But cash flow told the real story. I was profitable but cash-poor. Forecasting saved my business."
The Cash Flow Forecasting Framework
Step 1: Build a 90-Day Forecast
Create a spreadsheet with:
Starting cash balance
Expected cash in (by date)
Expected cash out (by date)
Ending cash balance (running total)
Simple template:
Date | Cash In | Cash Out | Net | Running Balance |
|---|---|---|---|---|
May 1 | $0 | $0 | $0 | $25,000 (starting) |
May 5 | $10,000 | $25,000 | -$15,000 | $10,000 |
May 15 | $15,000 | $5,000 | +$10,000 | $20,000 |
May 30 | $20,000 | $10,000 | +$10,000 | $30,000 |
... | ... | ... | ... | ... |
Forecast 90 days ahead (rolling, update weekly).
Step 2: Forecast Cash In (Collections)
Don't use revenue. Use when you'll actually get paid.
Example:
Invoice sent April 1: $10K, net-30 terms
Revenue recognized: April 1
Cash collected: May 1 (30 days later)
Forecast cash in: May 1
Sources of cash in:
Customer payments (invoices)
Subscription renewals
New sales
Loans/investments
Track by expected collection date, not invoice date.
Pro tip: Add a buffer
If payment terms are net-30, assume net-40 (customers are often late)
Better to be conservative
Step 3: Forecast Cash Out (Expenses)
List all expenses by payment date:
Fixed expenses (predictable):
Payroll (1st and 15th of month)
Rent (1st of month)
Software subscriptions (varies)
Loan payments (fixed date)
Variable expenses (estimate):
Contractors (based on projects)
Advertising (monthly budget)
Supplies (as needed)
One-time expenses:
Equipment purchases
Annual insurance
Tax payments
Example:
Date | Expense | Amount |
|---|---|---|
May 1 | Rent | $3,000 |
May 5 | Payroll | $25,000 |
May 10 | Software subscriptions | $2,000 |
May 15 | Payroll | $25,000 |
May 20 | Contractor payments | $8,000 |
May 31 | Tax payment | $10,000 |
Total cash out (May): $73,000
Step 4: Calculate Running Balance
Formula:
Running Balance = Previous Balance + Cash In - Cash Out
Example:
Date | Cash In | Cash Out | Running Balance |
|---|---|---|---|
May 1 | $0 | $3,000 | $22,000 ($25K - $3K) |
May 5 | $10,000 | $25,000 | $7,000 ($22K + $10K - $25K) |
May 15 | $15,000 | $30,000 | -$8,000 (uh oh!) |
If running balance goes negative = cash crisis ahead.
Step 5: Identify Cash Shortfalls
Look for negative balances in your forecast.
If you see one:
Option 1: Accelerate cash in
Offer early payment discount (2% off if paid in 10 days)
Invoice immediately (don't delay)
Follow up on overdue invoices
Require deposits upfront
Option 2: Delay cash out
Negotiate payment terms with vendors (net-30 → net-60)
Delay non-essential expenses
Hire slower (delay start dates)
Option 3: Add cash
Line of credit
Investor funding
Personal loan
The key: You see it coming 30-60 days ahead (not 5 days before payroll).
Step 6: Update Weekly
Every Friday:
Update actual cash in/out for the week
Adjust forecast based on new information
Check for upcoming shortfalls
Cash flow changes fast. Weekly updates keep you ahead.
Step 7: Set a Minimum Cash Balance
Decide: What's the minimum cash you need in the bank?
Formula:
Minimum Cash = 1-3 months of fixed expenses
Example:
Monthly fixed expenses: $50K
Minimum cash buffer: $50K-150K
If forecast shows balance dropping below minimum:
Take action immediately (accelerate collections, delay expenses, add cash)
This buffer prevents panic.
Advanced Cash Flow Management
Use Scenario Planning
Create 3 forecasts:
Best case:
All customers pay on time
All sales close
No unexpected expenses
Likely case:
80% of customers pay on time
70% of pipeline closes
Normal expenses
Worst case:
50% of customers pay late
50% of pipeline closes
Unexpected expense (equipment breaks)
Plan for likely case. Prepare for worst case.
Track Cash Conversion Cycle
Cash conversion cycle = How long money is tied up
Formula:
Days to collect + Days in inventory - Days to pay vendors
Example (SaaS):
Days to collect: 30 (net-30 terms)
Days in inventory: 0 (no inventory)
Days to pay: 15 (you pay vendors faster)
Cash conversion cycle: 15 days
Goal: Reduce this number
Collect faster (net-15 instead of net-30)
Pay slower (negotiate net-45 with vendors)
Automate Collections
Use tools to accelerate cash in:
Stripe/PayPal:
Auto-charge credit cards (no waiting for invoices)
Automated invoicing:
Send invoices immediately (not days later)
Auto-reminders (3 days, 7 days, 14 days overdue)
Early payment discounts:
2% off if paid in 10 days
Incentivizes fast payment
Cash Flow by Business Type
SaaS/Subscription
Cash flow advantage:
Recurring revenue (predictable)
Upfront payments (annual plans)
Cash flow risk:
Churn (customers cancel)
Failed payments (expired cards)
Forecast:
MRR × renewal rate
Subtract expected churn
Add new sales
Service Business (Agency, Consulting)
Cash flow advantage:
Can require deposits (50% upfront)
Monthly retainers (recurring)
Cash flow risk:
Project-based (lumpy revenue)
Payment terms (net-30, net-60)
Forecast:
Track invoice dates + payment terms
Assume 20% pay late
Require deposits for new projects
E-commerce/Physical Products
Cash flow advantage:
Immediate payment (customers pay upfront)
Cash flow risk:
Inventory costs (pay before you sell)
Seasonal revenue (Q4 spike)
Forecast:
Inventory purchases (cash out before sales)
Sales by season
Factor in returns/refunds
Tools for Cash Flow Forecasting
Simple (spreadsheet):
Google Sheets (free template below)
Excel
Accounting software:
QuickBooks (cash flow forecasting built-in)
Xero (cash flow dashboard)
Wave (free, basic forecasting)
Dedicated tools:
Float (cash flow forecasting tool, $50-200/month)
Pulse (simple cash flow app, $30/month)
Dryrun (scenario-based forecasting, $50/month)
Start with Google Sheets. Upgrade if needed.
Common Cash Flow Mistakes
Mistake 1: Using revenue instead of collections
You think you have $50K coming in
Reality: Only $30K collected (rest is delayed)
Fix: Forecast by collection date
Mistake 2: Ignoring payment terms
Net-30 means 30 days (not immediately)
Fix: Add payment term delays to forecast
Mistake 3: Not forecasting expenses
Only tracking revenue
Surprised by big expenses
Fix: Forecast both in and out
Mistake 4: Forecasting once, never updating
Set it and forget it
Cash flow changes weekly
Fix: Update every Friday
Mistake 5: No buffer
Running balance at $0
One late payment = crisis
Fix: Maintain 1-3 months expenses as buffer
Today's 10-Minute Action Plan
Build your first cash flow forecast:
Open Google Sheets
Create columns: Date | Cash In | Cash Out | Running Balance
Enter starting cash balance (check your bank)
List next 30 days of expected payments (from customers)
List next 30 days of expected expenses (payroll, rent, etc.)
Calculate running balance for each day
Look for negative balances (shortfalls)
Simple template:
Date | Cash In | Cash Out | Balance |
|---|---|---|---|
Today | $0 | $0 | $25,000 |
May 5 | $10,000 | $20,000 | $15,000 |
May 15 | $5,000 | $15,000 | $5,000 |
May 30 | $20,000 | $5,000 | $20,000 |
If balance goes negative → Take action now.
A Final Thought
Cash flow crises don't happen overnight. They happen slowly, then suddenly.
Forecasting gives you the early warning system.
You can't avoid every cash crunch. But you can see them coming.
And that's the difference between survival and failure.
Have you ever run out of cash unexpectedly? Hit reply and share your story. I'd love to hear it.
Refer Folks, Get Free Access
What This Is
A complete, plug-and-play 13-week cash flow forecasting system designed specifically for microteams. This toolkit includes ready-to-use spreadsheet templates, scenario planning frameworks, weekly update checklists, and automated alert formulas that tell you exactly when you're heading for a cash crunch 30, 60, or 90 days before it happens.
Why You Need This
Running out of cash is the #1 killer of profitable businesses. You can have $100K in outstanding invoices and still miss payroll if the timing doesn't line up. Most founders check their bank balance reactively, when they're already in trouble. This kit gives you a proactive early-warning system that shows you exactly where your cash will be every single week for the next 3 months.
No more panic. No more scrambling. No more pulling from personal savings at 11 PM because payroll hits tomorrow.
Subscribe to our premium content to read the rest.
Become a paying subscriber to get access to this post and other subscriber-only content.
Upgrade