Will you run out of cash this quarter?
Every line of the deterministic forecast shows positive cash, and the company still runs out. Simulating receipts and disbursements shows the probability of dipping below zero, and which week it happens.
Finance Intermediate Monte Carlo Pro engine
After you install, this is the model to open.
Will the Cash Last Thirteen Weeks?
- In your spreadsheet, click the Sortia icon in the strip of icons down the right-hand edge. No strip? Click the arrow at the bottom-right to open it. You can also use Extensions, then Sortia, then Open Sortia.
- Click Start from a template and put that name in the search box.
- Pick the card with that name and click Load this template. It arrives on a new tab with real numbers already in it.
This one runs on a Pro engine, and every free install includes five full-quality runs on your own numbers, shared across all five Pro engines rather than five for each. After that, Pro is $199/year.
The answer
Twenty thousand simulated quarters:
- Lowest cash, mean
- $35K
- Lowest cash, P5
- -$119K
- Dips below zero
- 24% of quarters
A forecast whose every line is positive still hits zero in about one quarter in four, and week 7 is where. That is the case for the credit line, and the P5 (negative $119K) is its size. Rerun every quarter with the lumpy payments moved to their real weeks.
The model
Opening cash of $80K, weekly receipts Normal around $118K, disbursements a PERT range leaning expensive, and the $62K quarterly tax payment landing in week 7. The model tracks the lowest weekly balance across the quarter.
| Opening cash | $80,000 |
| Weekly receipts | Normal($118K, $9K) |
| Weekly disbursements | PERT $104K-$111K-$126K |
| Tax payment, week 7 | $62,000 |
| Lowest weekly cash | simulated |
Once it is in your sheet
- The model arrives with real numbers in it and runs as it stands, so you can press the button first and understand it second.
- Change the numbers to yours. The sheet marks which cells are inputs and which hold formulas, and most labels carry a note explaining the row.
- Press the run button at the bottom of the panel. It is labeled for the tool you are in, and the result lands on its own tab, with a written reading of it beside the figures.
Never used Google Sheets? Start here goes the whole way, in seven steps, and assumes nothing.
Next question
- What are the odds you breach the covenant?How Close Is the Covenant?
- Every line looks fine. Will the year still go over?Will the Budget Hold?
- How far could next year miss the revenue plan?What Will Next Year's Revenue Be, as a Range?
- How much of your risk is just the exchange rate?What Does the Exchange Rate Do to Profit?
- Does growth or margin move your profit more?How Do Growth and Margin Move EBITDA Together?
- How far apart are your best year and your worst?Base, Better, Worse: Save the Three Cases
Every model like this one, and the method behind them: Monte Carlo simulation.