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Finance · 4 min read
The 90-day cash forecast: how to build it and keep it alive
Knowing whether you will have the cash for suppliers, salaries and taxes six weeks from now is worth more than many reports on the past. How to build a reliable forecast and keep it up to date.
Why look ahead
Most financial reports look backwards: the annual accounts, the quarterly P&L, the month-end balance. This information is essential, but it does not answer the question business owners ask themselves most often: will there be enough cash in the coming weeks to pay suppliers, salaries and taxes?
A short-term cash forecast answers exactly that question. A 90-day horizon is a good compromise: long enough to leave time to react, for example by negotiating a credit line or postponing an investment, and short enough to rest on data that is largely already known.
Start with what you know
The first building block of the forecast is items that are already documented. Sales invoices issued but not yet collected, with their due dates. Purchase invoices received and awaiting payment. Certain, recurring outflows such as salaries, rent, loan repayments and taxes, with their respective deadlines.
On this foundation, it is worth applying a realistic adjustment. Not all customers pay on time, and using contractual dates without adjustment produces forecasts that are systematically optimiztic. If a customer usually pays a few weeks late, the forecast should reflect that.
Outflows need attention too. Tax and social security deadlines, the thirteenth-month salary common in Italy, annual bonuses and lease payments tend to cluster in certain periods of the year, and it is precisely these clusters that put cash under pressure when they coincide with slower collections.
Add what you expect
The second building block is items not yet documented but reasonably expected: orders won but not yet invoiced, recurring contracts that will generate invoices in the coming months, purchases already planned. This is where working with sales and purchasing comes in, as they know better than anyone what is about to arrive.
It is important for the forecast to distinguish what is certain from what is estimated. A forecast that blends the two indiscriminately is hard to interpret, whereas one that shows the documented and expected components separately tells you how far to trust the result.
A useful habit is to compare the forecast each week with what actually happened. Recurring variances reveal where assumptions are wrong, such as a customer slower than expected or an underestimated cost item, and let you correct the model instead of being caught out again and again.
Budgets, cost centers and scenarios
The cash forecast and the budget are different but complementary tools. The cost center budget sets how much each area can spend over the year; the forecast shows when that spending will hit liquidity. Linking the two helps you spot early the areas that are spending faster than planned.
It also pays to think in scenarios. Alongside the base forecast, it can be useful to ask what would happen if a major customer paid late or a large order slipped by a month. There is no need for complex models: two or three alternative assumptions are enough to see how much headroom you really have.
Base scenario
- Collections on usual dates
- Orders on schedule
- Spending in line with budget
Conservative scenario
- A major customer pays late
- An order slips by a month
- Thinner cash margin
A forecast that updates itself
The main limitation of spreadsheet forecasts is that they go stale quickly. Every receipt, every new invoice, every order won changes the picture, and updating everything by hand takes time that is rarely available. The result is a forecast that gets looked at less and less, just when it is needed most.
In Finance, the 90-day cash forecast updates automatically with sales and purchase invoices, reconciled collections and recurring payments, and takes customers’ actual payment behavior into account. Incoming orders from the CRM are included as an estimated component, cost center budgets stay linked to actual spending, and the AI flags in advance the weeks when cash risks falling below the safety threshold.
The forecast becomes an everyday working tool, not a document to prepare for the month-end meeting.
A forecast that updates itself becomes an everyday tool, not a document for the month-end meeting.
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