Use your data to prevent unexpected cash shortfalls

Use your data to prevent unexpected cash shortfalls

Dashboard Setup & Priority

• Widgets:
• Cash Balance vs. Forecast (daily closing balance vs. plan)
• Days-of-Cash gauge (Current Cash ÷ Avg. Daily Disbursements)
• Variance Analysis table (top inflow/outflow deviations)
• AR Aging report (invoices by aging buckets)

• Criticality: High-Impact — immediate visibility into liquidity threats

• Cadence: Daily, at start of business (~ 5 minutes)

Core Principle

Days-of-Cash = Current Cash ÷ Average Daily Disbursements

Five-Minute Routine

1. Review Cash vs. Forecast (≈ 1 min)
• Compare today’s closing balance against your forecast.
• Alert: Variance > ± 10 % → investigate root cause.

2. Compute Runway (≈ 1 min)
• Calculate average daily disbursements:

Avg Daily Disbursements=Total Outflows (last 30 days)30 \text{Avg Daily Disbursements} = \frac{\text{Total Outflows (last 30 days)}}{30}

• Compute Days-of-Cash:

Runway=Current CashAvg Daily Disbursements \text{Runway} = \frac{\text{Current Cash}}{\text{Avg Daily Disbursements}}

3. Analyze Material Variances (≈ 1 min)
• Identify top 1–2 unplanned outflows in the Variance table.
• Determine whether each can be deferred, renegotiated, or must proceed.

4. Assess Receivables Health (≈ 1 min)
• Flag invoices > 30 days past due in AR Aging.
• Insight: Each overdue day is an implicit working-capital loan at your cost of capital.

5. Execute One High-Impact Action (≈ 1 min)

Choose the most levered move to restore runway:

• Accelerate Collections: Send reminders with a 1–2 % early-pay incentive.
• Extend Payables: Negotiate a term extension on your largest vendor liability.
• Pause Discretionary Spend: Freeze non-critical subscriptions or hires.
• Why one? Focus ensures speed, clear accountability, measurable impact, and sustainable habit formation.
• Exception: If runway < (Your Buffer ÷ 2), you may pair two actions for immediate relief.

Control Limits & Key Metrics

• Cash balance vs. forecast (% variance)

• Days-of-Cash runway

• % of receivables overdue

• Top 2 unplanned cash variances

Habit Formation

• Daily Ritual: Block 5 minutes each morning for your “Liquidity Check” and set dashboard alerts for your critical thresholds.

• Weekly Deep-Dive: Every Friday, review variance trends and AR aging to address any recurring issues.

Real-World Example

Note on Your Custom Runway Buffer