Cash management is the discipline of forecasting when money will enter and leave, protecting bank access, collecting receivables, timing obligations responsibly, and keeping enough liquidity for operations and shocks. Profit does not guarantee cash because revenue, expense, investment, financing, and settlement occur at different times.
Build a rolling 13-week cash forecast
Start with cleared bank cash. Forecast receipts and payments by week using expected dates—not accounting dates:
Ending cash = beginning cash + cash receipts − cash payments.
The next week’s beginning cash equals the prior week’s ending cash. Separate committed items from estimates and use base, downside, and severe-but-plausible scenarios.
| Forecast section | Examples |
|---|---|
| Operating receipts | Customer collections, subscriptions, refunds received |
| Operating payments | Suppliers, rent, tax, insurance, and operating expenses |
| Investing | Equipment purchases and asset-sale proceeds |
| Financing | Borrowings, repayments, interest, and owner transactions |
| Minimum buffer | Policy reserve and restricted cash exclusion |
Improve collection without harming customers
Set credit terms before sale, invoice accurately and promptly, provide clear payment instructions, and track promises. Segment receivables by age, value, dispute, and likelihood. Resolve genuine billing errors quickly and escalate consistently.
Measure days sales outstanding carefully and use the workflow in Accounts Receivable.
Control payments and banking
- Separate vendor creation, invoice approval, payment release, and reconciliation.
- Require independent callback for bank-detail changes.
- Use individual accounts, multifactor authentication, transaction limits, and alerts.
- Reconcile bank activity promptly and review old outstanding items.
- Time legitimate payments to agreed terms without damaging critical suppliers.
Set a liquidity buffer
A buffer should reflect forecast volatility, customer concentration, seasonality, access to credit, insurance, fixed obligations, and recovery time. Restricted cash and an undrawn facility with conditions are not identical to freely available cash. Document where funds are held and who may move them.
Use liquidity metrics together
Review minimum forecast cash, forecast error, overdue receivables, cash conversion cycle, concentration, debt-service dates, and covenant headroom. Balance-sheet measures such as the current ratio add context, but they do not show daily timing or asset collectibility.
Create escalation triggers
Define actions before a crisis. A forecast falling below the buffer might trigger collection calls, discretionary-spend review, inventory action, financing discussion, and leadership approval. Severe scenarios may require professional restructuring, legal, or insolvency advice; early action preserves more options.
Weekly cash meeting agenda
- Reconcile actual beginning cash.
- Explain prior forecast error.
- Review major receipts and payments by owner.
- Examine bank, fraud, funding, and covenant risks.
- Approve actions, deadlines, and assumptions.
- Roll the horizon forward one week.
Frequently asked questions
How is cash management different from bookkeeping?
Bookkeeping records events; cash management uses records and forward estimates to make liquidity, collection, payment, funding, and control decisions.
Why use 13 weeks?
It is a practical short-term horizon for weekly visibility. Businesses may also need daily forecasts or longer strategic models.
Can a profitable company run out of cash?
Yes. Slow collection, inventory, debt repayment, investment, growth, or one-time shocks can consume cash before profit converts to liquidity.
Sources reviewed
Last reviewed: August 15, 2026. General education only; obtain professional accounting, financing, tax, or legal advice for material decisions.