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How to Create a 13 Week Cash Flow Forecast Model

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-Brandon Hinkle/

If your company is growing quickly, or just tight on cash, you should prepare a “13 Week Cash Flow Forecast” to avoid running out of cash at any given point.  Why 13 weeks?  Because this ensures monthly AND quarterly debt payments are included.  Beyond 13 weeks is less relevant; the short term is much more predicable than the outer months.  The goal is to protect & predict cash flow.

Step 1:  Gather the required info

  • Pull the company’s checking account statements for the last 3-4 months.  Highlight all recurring expenses/payments for salaries, debt, leases & rent, utilities, insurance, bank fees, distributions, capex, etc.
  • Print out your detailed Accounts Payable (“A/P”) aging report.
  • Print out your detailed Accounts Receivable (“A/R”) aging report.

Step 2: Create an excel spreadsheet that shows the weeks across the top, tracking the inflows & outflows of cash.  You should also create a column for Actual next to Budget each week so that you can compare actual activity to forecasted activity.  For example:

  • Create rows for large sources & uses of cash.  For example, payments from large customers, payments to large vendors, salary expense, debt payments, etc.
  • Enter your regularly scheduled payments (the ones you highlighted in the bank statements) in the weekly outflows column.
  • Enter your Vendor payments when they are scheduled to be paid, per your A/P aging.  When you issue a purchase order (“PO”), enter the to-be-purchased amount into the Budget period you expect to make the payment.
  • Enter your Customer cash receipts when they are to be received, per the A/R aging.
  • Your total inflows less your total outflows equals your net cash flow for the week.
  • You weekly net cash flow less your beginning cash balance = ending cash balance.
  • Your ending cash balance plus your line of credit availability = total liquidity.

Step 3: Beware of common mistakes

  • Keep a running tally of cash & liquidity.  For example, next week’s beginning cash balance should be equal to the cash balance at the end of this week.  If you have a line of credit, be sure to include line draws as a source (inflow) of cash and line paydowns as a “use” (outflow) of cash.  If you have a $1 million line of credit with an $800k balance, you have $200k of availability.  If you borrower another $50k this week, then you’ll only have $150k available next week.  The whole point of maintaining a 13 Week Cashflow Forecast is to protect & predict cash and liquidity so this part is important.
  • Keep your line of credit availability updated, particularly if you’re on a borrowing base.
  • Don’t confuse cash bank balance with book balance.  You can’t pay the payroll with funds in float…
  • Be mindful of slow paying customers that don’t pay on time, don’t assume they will start now.
  • Don’t forgot about open POs.  Just because it’s not on the A/P doesn’t mean it won’t need to be paid; some vendors send invoices late, don’t forget about the open POs.
  • Ensure you can easily track results. Make sure the forecast is constructed with the line items that you can easily track.  Elegant projection models are useless unless the line items correspond to easily accessible data.  This helps easily explain/calculate any variance to the budget.
  • Capex happens.  Build in some cushion incase vehicles break down or roofs leak.
  • Be conservative, there’s no upside to making an aggressive cash flow projection.
  • Be proactive.  It’s always best to seek financing when you don’t need it; utilize free resources such as pluraFinancial or local Small Business Development Centers to help match you with the best banks for your business.



Written by entrabanker

March 14, 2012 at 3:50 am

How to Win a Business Plan Competition

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Several people have asked me about the process and lessons learned from our success in national business plan competitions…here are my takeaways:

1)      Be passionate.  I’ve seen a lot of brilliant ideas pitched by brilliant people that absolutely put the judges to sleep.  A successful VC once told me that judges want to know that that an entrepreneur has  enough passion that he will find a way to be successful, or die trying.

2)      Give the judges an analogy.  Make sure the judges understand your business from the beginning.  Don’t just tell them what it is, but also tell them what “it’s like” through analogies.  For example, we say we’re like but for small business loans.  This works well for us, but just be sure you have an analogy that works for you.  Rule of thumb : try it on your mom.

3)      Have a good reason for your business to exist.  This is something that I learned in my career as an underwriter, but is even more important when it comes to venture capital pitches and business plan competitions.  Solve a big problem or help someone get a job done…otherwise, the judges will pick your business apart.

4)      Define your market size, the bigger the better.

5)      Include a go-to-market strategy (illustrate how you will penetrate the market).  Don’t give a canned answer (SEO, magazines, radio, etc.)…have a creative way to attract customers.

6)      Be a compelling equity investment.  This is also known as the “Investment Rationale” slide.  To start, build a bottoms-up financial projection model and calculate an IRR for investors.  Be prepared to defend every assumption of your projections.  I cannot emphasize this enough.  Include a breakeven analysis. Make sure the judges fully and clearly understand how you’re going to make money.  Include the IRR, but do not focus on the IRR (focus on profit drivers).

7)      Calculate your cost to acquire each customer.  We got in trouble with this one, as we don’t think internet businesses like ours are as easy to calculate as some other businesses; wrong answer.  Some judges are hell-bent on this metric.  If click through rates are part of your pitch, be sure to also justify the “conversion ratios” built into your assumptions.

8)      Beware of trap questions.  Many judges in these competitions are like lawyers…they love to bait and trap you with their questions.  For example, a judge might say…”so you’re an ASP model, right?” or “so you’re just a lead generation business, right?”.  It’s tempting to say, “yes, you’re right”…problem is that this is a classic trap.  If you agree wholly to this assumption than you put your business in a defined little box, giving the judge ammo to shoot your business plan down, without leaving yourself any “outs”.  Unfortunately, the best way to answer these traps would be similar to what a politician does…don’t answer it, dodge it, and thank the judge for their good question.  Make no mistake, I hate this.  I like answering questions with an answer, but unfortunately judges love setting traps and those that don’t leave themselves an out will get killed by the judges.

9)      Know your competitors – existing and potential.  Even if your business doesn’t have competitors, it will.  Do not ever try to tell the judges you don’t have competitors because they will (i) assume you haven’t don’t your homework, and (ii) pick you apart.  Build a chart that shows your existing and potential competitors, and measure them across a 2D chart based upon points of parity and points of differentiation.  For example, we measure our competitors based upon ability to generate leads and the ability to increase efficiency for customers.  Know your customers, find out their strengths and weaknesses, and demonstrate why you’re building a better mouse trap then they could.

10)   KISS it.  Keep It Simple Stupid.  Make the slideshow aesthetically pleasing, don’t litter with lots of words because the judges will be trying to read the slide, and will get annoyed that you’re talking while they’re trying to read.  Demonstrate the business is the right horse and that management is the right jockey, but don’t try to fit in too much into the pitch.  Save it for the Q&A.  Business Plan competition winners and losers are made in the Q&A session – if you can anticipate all the questions and answer them concisely you’re chances of victory will go up exponentially.  In other words, you don’t need to talk about every aspect of your business in the core pitch, it’s beneficial to save some ammo for the Q&A session in my opinion.

There are tons of books and blogs that probably provide better guidance to winning business plan competitions, but these 10 takeaways are what I’ve seen to be the key factors to success.  In summary, demonstrate you’ve built the right horse, you are the right jockey, and that you’re solving a big problem.  If you can do that, and if you can anticipate the questions in the Q&A, you’ll do well in any business plan competition.

pluraFinancial won Runner-Up in the 2010 DFJ-Cisco Global Business Plan Competition and won the Citi Foundation Business Plan Competition in Chicago in 2011.  For further information, contact Brandon Hinkle at Brandon is the Co-Founder and CEO of, a free online matchmaker between banks and small businesses seeking debt financing.

How to Budget for a Small Business

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Cash is king.  Liquidity is the single most important aspect of a business; it is the life blood keeping your business alive.  Liquidity can be found in several ways:

External Sources

  • Equity: The initial period most business involves a certain amount of cash burn.  Estimate how long you believe you will generate more expenses then revenue, double that number, and try to start your business with that amount of equity; things always take twice as much time and money as you think.
  • Line of Credit.  It’s always best to get a line of credit when you don’t need one.  A line of credit will help you fund the time-gap between paying for inventory and receiving the cash from the sale of your product.

Internal Sources

  • Collecting A/R faster: hire a dedicated collection person.  Revenue means nothing in the absence of collections, and you’ll likely be too busy finding new business to manage collections on your own as the business grows.
  • Turn inventory faster: if you have any stale inventory, sell it for a discount.  So long as you sell it above cost it won’t hurt you, and the liquidity will give you flexibility.
  • Pay A/P slower.  Generally not a good idea, but in a pinch call your vendors and let them know you need to hold a payment for a couple weeks.  A courtesy call will go a long way; after all, you wouldn’t want to be surprised by a late customer payment!

To preserve liquidity you should do the following:

  • Create a 13-week cash flow forecast to ensure you don’t run into any unforeseen cash flow problems.  Keep a weekly spreadsheet of your projected cash flow side by side with actual cash flow.  This is basically doing a cash-based weekly financial projection.  13 weeks ensures that you always have monthly/quarterly debt payments forecasted. Look at your A/R aging report to determine when cash is coming in, and look at your A/P and checking account to determine when cash is going out the door.  If there is any shortfall, be sure you have room on the line of credit.
  • Finance equipment purchases.  Even if you think you have enough cash to pay for new vehicles, equipment, etc. with cash, you may need that extra liquidity down the line; a little extra interest expense is worth the peace of mind that you have excess liquidity to survive and advance.
Brandon Hinkle

Disclaimer: plura Financial is not a financial advisor and you should discuss any meaningful changes in your financial practices with your accountant/lawyer; these are just some best practices that management has learned along the way!

Written by entrabanker

November 8, 2011 at 10:41 pm