Who should do Detailed Cash Planning

  • Small vs. large companies
  • Business vs. personal finance
  • Starting out, no history
  • In trouble
  • In transition 

Small vs. large companies

The larger a company you are, the less likely you should be doing Detailed Cash Planning.  Part of it is the sheet magnitude of number crunching required.  Part of it is that cash has a different meaning in large companies.  You are much less likely to run out of it.  Maybe pay a little more than normal to borrow it.  Traditional financial models are usually sufficient, and you get the law of large numbers. 

0 to $ 1 million in sales is the sweet spot for Detailed Cash Planning, although I’ve seen it done in companies with as much as $10 million in annual sales. 

Business vs. personal finance

I’ve had several individuals express an interest in doing Detailed Cash Planning. These tend to be the more technical types.  Simple expense budgeting is sufficient for most, or even back of the envelope calculations.  For an individual, Detailed Cash Planning might help when you are close to being tapped out.  Or if you’re anal and just want to see every dollar spent. 

Small Businesses are the ones who really get the most out of doing Detailed Cash Planning.  Things are a little more complex than for an individual, especially on the cash inflow part of the equation.  The thing you have to pay attention to is how much time it takes to do.  If it consumes your time so that you don’t have time to make sales or service customers, it is kind of self-defeating.  But if you can do a Detailed Cash Plan in an hour or two, and not have to redo it for several weeks, it is time well spent. 

Starting out, no History

This is an ideal time to do some Detailed Cash Planning.  It helps you think through what you need to do to get the business off the ground.  It helps you decide whether to spend time trying to raise money, or spend the time bootstrapping, instead.  It helps you figure out how long you can survive without making any sales. 

In trouble

The stakes are higher, survival is at stake.  It is worth a lot of time and effort to be on top of your cash situation when the cash is in short supply.  The last thing you want to do is bounce a check when things are dicey.  Actually, the last thing you want to do is go out of business.  Detailed Cash Planning can help you through some tough times. 

In Transition 

When you are starting or growing a business, you spend a lot of time experimenting to see what works and what doesn’t.  Sometimes you zig, sometimes you zag.  It is nice to do some Detailed Cash Planning around these inflection points when the nature of your business changes.  The cash flow impact may not be captured in monthly budgets or traditional financial models.


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