13-Week Cash Flow Model: An Essential Tool to Navigate Economic Uncertainty
Tariffs, potential disruptions to supply chains, and the possibility of an economic recession are causing uncertainty in financial markets and in Board rooms around the globe. Rapid changes in raw material costs, inventory availability, product pricing, and customer demand can lead to rapid deterioration in revenue, margins and / or cash flow causing declining valuations, financial covenant issues, liquidity issues, increased shareholder activism, among other financial and operational challenges. Companies that are well capitalized and maintain ample cash and liquidity are best positioned to navigate these challenges and to capitalize on opportunities that may arise.
In order to successfully navigate the current market and economic environment, CEOs and CFOs must ensure effective cash flow management and ample liquidity under a wide range of possible scenarios. One of the most important tools available to these executives is the 13-week cash flow model.
“For CEOs and CFOs, one of the most important tools to navigate an uncertain economic environment is the 13-week cash flow model. ”
Navigate Uncertainty with Better Short-Term Cash Flow Visibility
A 13-week cash flow model is a short-term cash flow forecast tool that projects a company’s weekly cash inflows and outflows, ending cash, and available liquidity over the next 13 weeks. It is updated weekly, providing a rolling forecast that enables enhanced liquidity planning, improved decision-making, and proactive cash shortfall management. For companies and executives seeking a tool to help navigate economic uncertainty by better forecasting and managing cash flow, the 13-week cash flow forecast model is the answer.
Benefits 13-Week Cash Flow Model
The 13-week cash flow model provides a short-term, tactical view of liquidity, enabling companies to:
Ensure sufficient cash availability for operations, payroll, and debt obligations.
Identify potential liquidity risks well in advance.
Optimize working capital by managing receivables, payables, and inventory.
Perform scenario planning by sensitizing timing and amount of cash inflows and outflows.
Support financial decision-making related to capital expenditures, investments, or cost reductions.
Enhance stakeholder confidence (banks, investors, and suppliers) by demonstrating proactive cash management.
Who Uses 13-Week Cash Flow Models?
Many companies from General Motors, to Hertz, and Bed Bath & Beyond have relied on 13-week cash flow models to navigate liquidity and operational challenges. In addition, best-in-class private equity portfolio companies utilize 13-week cash flow models to manage liquidity and covenants following a leveraged buyout.
Key Components of a 13-Week Cash Flow Model
A 13-Week Cash Flow Model consists of three primary sections: (i) cash inflows, (ii) cash outflows and (iii) net cash flow and liquidity summary. Each category is broken down into subcomponents that are critical for accurate forecasting.
1. Cash Inflows (Receipts)
Customer Collections: Expected payments from customers (considering accounts receivable terms, aging, bad debts, etc).
Other Operating Receipts: Any additional business income (rebates, etc.).
Financing & Investment Inflows: Loan proceeds, interest income, hedge receipts, equity investments, or asset sales.
2. Cash Outflows (Disbursements)
Payroll & Benefits: Salaries, bonuses, benefits payments, Board fees, etc.
Accounts Payable (AP): Vendor payments, utilities, rent, and other operating expenses.
Capital Expenditures (CapEx): Planned investments in equipment, technology, or infrastructure.
Debt Service: Interest and principal repayments.
Tax Payments: Corporate taxes, VAT, payroll taxes, or other regulatory obligations.
3. Net Cash Flow & Liquidity
Net Cash Flow: The difference between total cash inflows and outflows.
Beginning Cash Balance: Cash available at the start of the period.
Ending Cash Balance: The projected cash position at the end of each week.
Projected Liquidity: Total cash plus available revolving credit facility (inclusive of letters of credit, financial covenants, etc.).
How to Build the 13-Week Cash Flow Model
Step 1: Gather Historical Data
In order to get an accurate cash projection for cash flow management purposes, start by analyzing past cash flows, typically over the last 18-24 months, to identify patterns in customer collections, vendor payments, payroll cycles, and other recurring transactions. This longer time horizon is helpful in identifying annual recurring vendor / customer payments. For most companies, existing reports from accounting and financial reporting software are sufficient for this purpose. Key details needed include customer / vendor name, payment/receipt date, payment receipt amount. Contractual terms for receivables / payables are also important to ensure that teams are optimizing cash flow.
Step 2: Discuss Recent Changes / Commitments with Business Leaders
Discuss new customers and / or new vendors and lost customers / vendors with key business leaders. Over reliance on historical financials can obscure significant changes that could materially impact expected future results.
Review current customer / vendor terms. Ensure forecast is based on the latest available terms for customers and vendors.
Step 3: Forecast Cash Inflows
Project customer receipts based on Accounts Receivable terms and historical collection trends. Use historical / projected DSO (Days Sales Outstanding) to estimate timing of collections.
Include expected new revenue streams. Consider upcoming orders / contract renewals and new customer acquisitions.
Factor in financing related inflows. Include interest income, hedge inflows, planned debt draws, equity infusions, and asset sales.
Step 4: Forecast Cash Outflows
Include fixed & variable costs. Ensure major fixed expenses (e.g., payroll, rent) are included. Note: Be sure to factor in bonus payouts, pay increases, increases in benefit costs, rent increases, etc.
Map out Accounts Payable payment schedules. Align vendor payments with contractual due dates and historical payment trends. Include expected cost increases, particularly for suppliers, SaaS vendors, etc.
Incorporate tax and debt obligations. Include estimated tax, interest, and debt principal payments, including cash flow sweeps. Note: Consider financial covenants and potential implications on cash flow requirements. Required debt paydown or amendment fees can further exacerbate challenging cash flow situations.
Contingency. Include a contingency amount to account for unexpected expenses.
Step 5: Calculate Net Cash Flow & Ending Cash Balance
Subtract total cash outflows from cash inflows each week.
Add the net cash flow to the beginning cash balance to determine the ending cash balance for each week.
Evaluate total liquidity by calculating ending cash balance and adding available borrowings after taking into consideration letters of credit, borrowing base requirements, financial covenants, etc.
Step 6: Scenario Planning & Sensitivity Analysis
Create base-case, best-case, and worst-case scenarios. What if customer payments are delayed by two weeks? What if a major customer declares bankruptcy? What if AP payments must be accelerated? What happens if you violate a financial covenant?
Stress test liquidity assumptions to ensure adequate reserves.
Step 7: Monitor & Update Weekly
The model should be updated every week with actual cash flow data.
Compare forecasts vs. actuals to identify variances and improve accuracy.
Continuously Optimize Your 13-Week Model for Cash Flow Management
Each week, the CFO should review the results of the 13-Week Cash Flow Model with the finance team to understand variances in estimated vs actual cash inflows and outflows. Variances are expected but should be logged and incorporated into the revised 13-week cash flow model. If customer receipts or vendor payments were delayed, those should be incorporated into the future. If cash inflows or outflows were pulled forward from future periods, those should be removed. Persistent errors should be addressed immediately as they could be an indication of errors in forecasting, changes in the operating environment, or could signal opportunities to improve the business.
Take Decisive Action
An accurate 13-Week Cash Flow Forecast offers valuable forward-looking insights that daily or weekly performance reviews and budget variance analyses alone cannot provide. Swift and decisive action can improve cash flow and liquidity and can provide a lifeline during times of financial stress or restructuring.
Examples of decisive actions can include:
Deferring large inventory purchases
Delaying payment to non-critical vendors
Rationalizing inventory through discounts / sales
Enacting a hiring freeze
Eliminating discretionary spending on travel, marketing, consulting fees, etc.
Implementing aggressive cutting initiatives, including headcount reductions
Deferring non-critical capital expenditures
Pursuing overdue receivables
Eliminating non-core software / unused licenses
Negotiating with suppliers to improve terms
Raising equity or drawing on a revolving credit facility to ensure ample cash
Proactively communicating about about pending challenges with investors or lenders
Initiating a divestiture of non-core assets or businesses
Among many others
Where To Begin?
For help building your 13-week cash flow model, contact Keene Advisors. Our team has built hundreds of financial models for clients across a range of industries, providing visibility into cash flow projection, and enabling cash flow management. If you prefer to build the 13-week cash flow model on your own, save time by starting from a proven model template developed by our team.
Want to receive a free 13-week cash flow model template? Let us know!
About Keene Advisors
Keene Advisors is a Full-Service Strategy Consulting and Investment Banking Advisory firm with over $40 billion in M&A, Capital Raising, and Restructuring experience. We have built hundreds of financial models for clients to support corporate finance and financing transactions, organic growth opportunities, cost savings initiatives, lender negotiations, and other critical initiatives.