Liquidity and planning
13-month cash flow forecast. Hieu Van Nguyen
The 13-month view is where cash meets the plan. This build uses an invented company with seasonal sales. Change the season, the spending plan and the debt terms, and see the lowest cash month, the covenant headroom and how the 13-week view connects to it.
What this shows
Monthly operating cash flow from the profit plan
Seasonality in sales and working capital
Capital spending, debt repayments and the covenant test each month
How the first quarter matches the 13-week forecast
Sample build: 13-month cash flow forecast
Quillfeather Garden Supply is an invented wholesaler of garden and patio goods. It sells to independent garden centres, buys ahead of the spring season, and has a revolving credit line. This view starts from a monthly profit plan with a seasonal sales shape, turns EBITDA into cash through working capital, tax, spending, debt and dividends, and tests the lender's two covenants every month.
Invented company and invented numbers for illustration. Not data from any employer.
What to try
- Move the large project to month 3 and watch headroom.
- Switch to Year-end peak and find the tightest month.
- Lower gross margin toward 35% and watch leverage.
- Open the bridge to see why the first quarter differs.
Sales build through spring and peak in June and July, like a garden business.
The project is paid in equal parts over three months from the month you pick.
How to read it
- EBITDA is operating profit before interest, tax and depreciation. Cash runs lower in a growing season because receivables and inventory absorb it.
- The credit line draws when cash would end under $1.0M and repays when cash is above that plus $500K.
- Cash plus unused credit line is the money available at short notice. It is what the liquidity covenant measures.
Lowest cash month
Jun (month 4): $2.76M of cash plus unused line
Cash is $1.00M and $2.24M of the $4.00M credit line is drawn. The covenant minimum is $2.00M, so headroom that month is $758K.
Credit line at its peak
$2.24M
Jun (month 4), limit $4.00M.
Months below a cushion
0
No covenant is broken.
Tightest liquidity headroom
$758K
Jun (month 4).
Tightest leverage headroom
1.26x
Jun (month 4). Room for $5.85M more debt.
Cash, credit line and covenant, by month
Show the numbers behind the chart
| Month | Ending cash | Credit line | Cash plus unused line |
|---|---|---|---|
| 1 Mar | $1,500,000 | $308,516 | $5,191,484 |
| 2 Apr | $1,000,000 | $976,503 | $4,023,497 |
| 3 May | $1,000,000 | $1,963,448 | $3,036,552 |
| 4 Jun | $1,000,000 | $2,241,724 | $2,758,276 |
| 5 Jul | $1,495,837 | $2,241,724 | $3,254,113 |
| 6 Aug | $1,500,000 | $467,515 | $5,032,485 |
| 7 Sep | $1,907,400 | $0 | $5,907,400 |
| 8 Oct | $2,071,645 | $0 | $6,071,645 |
| 9 Nov | $1,471,690 | $0 | $5,471,690 |
| 10 Dec | $1,242,736 | $0 | $5,242,736 |
| 11 Jan | $2,451,728 | $0 | $6,451,728 |
| 12 Feb | $2,260,500 | $0 | $6,260,500 |
| 13 Mar | $1,000,000 | $497,201 | $4,502,799 |
Payments are shown as negative numbers so each column adds down. Sales follow the season. Receivables and inventory use cash while sales rise, and give it back as the season ends. Interest and tax use the balances at the start of each month.
| Period | Plan year, months 1 to 12 | A year on | ||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Dollars in thousands | 1 Mar | 2 Apr | 3 May | 4 Jun | 5 Jul | 6 Aug | 7 Sep | 8 Oct | 9 Nov | 10 Dec | 11 Jan | 12 Feb | 13 Mar | 13 months |
| Profit plan | ||||||||||||||
| Sales | 3,822 | 4,914 | 6,006 | 6,552 | 6,552 | 5,460 | 4,368 | 3,822 | 3,822 | 3,822 | 2,730 | 2,730 | 4,013 | 58,613 |
| Cost of goods | (2,293) | (2,948) | (3,604) | (3,931) | (3,931) | (3,276) | (2,621) | (2,293) | (2,293) | (2,293) | (1,638) | (1,638) | (2,408) | (35,168) |
| Gross profit | 1,529 | 1,966 | 2,402 | 2,621 | 2,621 | 2,184 | 1,747 | 1,529 | 1,529 | 1,529 | 1,092 | 1,092 | 1,605 | 23,445 |
| Payroll | (867) | (867) | (867) | (867) | (867) | (867) | (867) | (867) | (867) | (867) | (867) | (867) | (867) | (11,267) |
| Other operating costs | (363) | (467) | (571) | (622) | (622) | (519) | (415) | (363) | (363) | (363) | (259) | (259) | (381) | (5,568) |
| Rent | (95) | (95) | (95) | (95) | (95) | (95) | (95) | (95) | (95) | (95) | (95) | (95) | (95) | (1,235) |
| EBITDA | 204 | 537 | 870 | 1,037 | 1,037 | 704 | 371 | 204 | 204 | 204 | (129) | (129) | 262 | 5,375 |
| Working capital (growth uses cash) | ||||||||||||||
| Receivables | 614 | (1,529) | (1,529) | (764) | 0 | 1,529 | 1,529 | 764 | 0 | 0 | 1,529 | 0 | (1,796) | 347 |
| Inventory | (648) | (655) | (328) | 0 | 655 | 655 | 328 | 0 | 0 | 655 | 0 | (770) | (688) | (796) |
| Payables | 432 | 772 | 382 | 0 | (764) | (764) | (382) | 0 | 0 | (764) | 0 | 898 | 803 | 612 |
| Working capital change | 398 | (1,412) | (1,474) | (764) | (109) | 1,420 | 1,474 | 764 | 0 | (109) | 1,529 | 128 | (1,682) | 163 |
| From EBITDA to cash | ||||||||||||||
| Other receipts | 43 | 43 | 43 | 43 | 43 | 43 | 43 | 43 | 43 | 43 | 43 | 43 | 43 | 559 |
| Sales and use tax | (24) | (24) | (24) | (24) | (24) | (24) | (24) | (24) | (24) | (24) | (24) | (24) | (24) | (312) |
| Income tax | (10) | (98) | (184) | (226) | (225) | (139) | (55) | (13) | (13) | (13) | 0 | 0 | (28) | (1,003) |
| Capital spending: ordinary | (130) | (130) | (130) | (130) | (130) | (130) | (130) | (130) | (130) | (130) | (130) | (130) | (130) | (1,690) |
| Capital spending: large project | 0 | 0 | 0 | 0 | 0 | 0 | (600) | (600) | (600) | 0 | 0 | 0 | 0 | (1,800) |
| Term loan repayment | (50) | (50) | (50) | (50) | (50) | (50) | (50) | (50) | (50) | (50) | (50) | (50) | (50) | (650) |
| Term loan interest | (32) | (32) | (32) | (32) | (31) | (31) | (31) | (31) | (30) | (30) | (30) | (30) | (29) | (401) |
| Interest on the credit line | (6) | (2) | (6) | (12) | (14) | (14) | (3) | 0 | 0 | 0 | 0 | 0 | 0 | (57) |
| Dividends | 0 | 0 | 0 | (120) | 0 | 0 | (120) | 0 | 0 | (120) | 0 | 0 | (120) | (480) |
| Net cash flow before the credit line | 391 | (1,168) | (987) | (278) | 496 | 1,778 | 875 | 164 | (600) | (229) | 1,209 | (191) | (1,758) | (297) |
| Cash and the credit line | ||||||||||||||
| Beginning cash | 1,800 | 1,500 | 1,000 | 1,000 | 1,000 | 1,496 | 1,500 | 1,907 | 2,072 | 1,472 | 1,243 | 2,452 | 2,261 | 1,800 |
| Credit line draw (+) or repayment (-) | (691) | 668 | 987 | 278 | 0 | (1,774) | (468) | 0 | 0 | 0 | 0 | 0 | 497 | (503) |
| Ending cash | 1,500 | 1,000 | 1,000 | 1,000 | 1,496 | 1,500 | 1,907 | 2,072 | 1,472 | 1,243 | 2,452 | 2,261 | 1,000 | 1,000 |
| Credit line balance | 309 | 977 | 1,963 | 2,242 | 2,242 | 468 | 0 | 0 | 0 | 0 | 0 | 0 | 497 | 497 |
| Term loan balance | 5,950 | 5,900 | 5,850 | 5,800 | 5,750 | 5,700 | 5,650 | 5,600 | 5,550 | 5,500 | 5,450 | 5,400 | 5,350 | 5,350 |
| Cash plus unused credit line | 5,191 | 4,023 | 3,037 | 2,758 | 3,254 | 5,032 | 5,907 | 6,072 | 5,472 | 5,243 | 6,452 | 6,261 | 4,503 | 4,503 |
The lender tests two things every month. Cash plus unused credit line must stay above $2.00M. Debt divided by EBITDA for the last twelve months must stay below 3.00x. Headroom is the room left before a test is broken. The cushion we want to keep is $500K of liquidity and 0.50x of leverage. A cell turns red when headroom falls below its cushion, and says Breach when it falls below zero.
| Month | Cash plus unused line | Liquidity headroom | Debt to EBITDA | Leverage headroom, turns | Leverage headroom, extra debt allowed |
|---|---|---|---|---|---|
| 1 Mar | $5.19M | $3.19M | 1.43x | 1.57x | $6.87M |
| 2 Apr | $4.02M | $2.02M | 1.55x | 1.45x | $6.46M |
| 3 May | $3.04M | $1.04M | 1.72x | 1.28x | $5.79M |
| 4 Jun | $2.76M | $758K | 1.74x | 1.26x | $5.85M |
| 5 Jul | $3.25M | $1.25M | 1.69x | 1.31x | $6.18M |
| 6 Aug | $5.03M | $3.03M | 1.28x | 1.72x | $8.24M |
| 7 Sep | $5.91M | $3.91M | 1.16x | 1.84x | $8.95M |
| 8 Oct | $6.07M | $4.07M | 1.14x | 1.86x | $9.17M |
| 9 Nov | $5.47M | $3.47M | 1.11x | 1.89x | $9.38M |
| 10 Dec | $5.24M | $3.24M | 1.09x | 1.91x | $9.60M |
| 11 Jan | $6.45M | $4.45M | 1.07x | 1.93x | $9.77M |
| 12 Feb | $6.26M | $4.26M | 1.06x | 1.94x | $9.94M |
| 13 Mar | $4.50M | $2.50M | 1.13x | 1.87x | $9.67M |
Debt is the term loan plus the credit line at the end of the month. EBITDA for the last twelve months uses last year for the months before March.
The first three months of this view cover the same period as the 13-week forecast. Both start from the same cash and credit line and describe the same company, so the totals should be close. They are not identical, because the weekly view follows each invoice, pay date and loan payment, and the monthly view works from the plan and month-end balances. The weekly side uses 42 days to collect and 35 days to pay suppliers, the same as the sliders here.
| Line | Months 1 to 3 | 13 weeks | Difference |
|---|---|---|---|
| Sales invoiced | $14,742,000 | $14,530,000 | $212,000 |
| Both start from the same season. The weekly view uses weekly orders, the monthly view uses the share of the annual plan that falls in March to May. | |||
| Collections from customers | $12,298,600 | $12,203,800 | $94,800 |
| The weekly view collects each invoice on its own payment curve (about 42 days) and names one large customer payment. The monthly view holds receivables at 42 days of sales at each month end. | |||
| Other receipts | $129,000 | $130,000 | -$1,000 |
| The same small run rate, counted by the week in one view and by the month in the other. | |||
| Payments to suppliers | $8,890,000 | $8,650,000 | $240,000 |
| The weekly view pays each supplier invoice after 35 days and includes one named large payment. The monthly view buys next month's goods ahead of the season and pays after 35 days of purchases. | |||
| Payroll | $2,600,000 | $2,400,000 | $200,000 |
| The 13 weeks hold six biweekly pay dates. The monthly view spreads 26 pay dates a year evenly, which is 6.5 for a quarter. | |||
| Operating costs | $1,400,490 | $1,300,000 | $100,490 |
| The weekly view uses a flat weekly run rate. The monthly view scales these costs with each month of sales. | |||
| Rent | $285,000 | $285,000 | $0 |
| Three monthly payments in both views. | |||
| Taxes | $364,589 | $282,000 | $82,589 |
| The weekly view pays the quarterly income tax estimate in one week. The monthly view pays a share of the year each month, based on profit. | |||
| Capital spending | $390,000 | $400,000 | -$10,000 |
| Small purchases in both views. The large project starts after these three months, so it is not in either one. | |||
| Debt service | $260,969 | $258,904 | $2,064 |
| The weekly view pays the term loan on three set dates. The monthly view charges interest on the opening balance each month. Both include interest on the credit line. | |||
| Net cash flow before the credit line | -$1,763,448 | -$1,242,104 | -$521,343 |
| Cash at the end of the period | $1,000,000 | $1,121,786 | -$121,786 |
| Credit line at the end of the period | $1,963,448 | $1,563,891 | $399,557 |
| Cash plus unused credit line at the end | $3,036,552 | $3,557,896 | -$521,343 |
Why the two views differ
Cash plus unused credit line is lowest in Jun (month 4) at $2.76M, the credit line peaks at $2.24M, and cash ends the 13 months at $1.00M. Both covenant tests stay above their cushions all year.
How I use it
Planning when to borrow or repay across the year
Showing leadership the cost of a spending plan in cash, not only in profit
Checking covenant headroom before committing to a large project