Cash Flow Scenario Planner

The following cash flow plan models your current agency position against a potential revenue contraction, highlighting the impact of your 45-day collection cycle on liquidity. # Cash Flow Scenario Plan ## 1. Planning Context **Business:** Creative Design Agency **Objective:** Evaluate 3-month survival during a 30% sales downturn. **Current Cash:** $20,000 **Key Constraint:** 45-day lag between invoicing and cash receipt. ## 2. Scenario Summary | Scenario | Sales Performance | Monthly Cash Impact | Survival Outlook | | :--- | :--- | :--- | :--- | | **Base Case** | $25,000/mo | +$9,000 (pre-tax) | Stable; building reserves. | | **Downside** | $17,500/mo | +$1,500 (pre-tax) | Tight; no room for error. | | **Stress Case** | $12,000/mo | -$4,000 (pre-tax) | Depletes cash in 5 months. | ## 3. Core Assumptions - **Receipt Timing:** 50% of invoices paid at 45 days; 10% late (60+ days). - **Overhead:** $16,000 fixed (Rent, Software, Base Payroll). - **Variable Costs:** Freelancers reduced by 20% in Downside/Stress cases. - **Tax:** $4,500 quarterly set-aside not included in monthly overhead. ## 4. Scenario Narratives - **Downside Case:** A 30% drop in sales ($17.5k) barely covers the $16k overhead. Because of the 45-day lag, you won't feel the cash pinch until Month 2. By Month 3, the buffer stops growing, leaving the agency vulnerable to one late-paying client. ## 5. Sensitivity Notes Your primary risk is **Debtor Days**. If your 45-day average slips to 60 days during a downturn, you will face a $12,500 cash gap in Month 2 regardless of sales volume. ## 6. Risk Triggers - **Trigger 1:** Cash balance drops below $12,000 (minimum safe operating reserve). - **Trigger 2:** Pipeline for following month falls below $20,000 in signed contracts. - **Trigger 3:** Average collection period exceeds 50 days. ## 7. Management Actions - **Immediate:** Implement 50% upfront deposits for all new projects to bridge the 45-day gap. - **Downside:** Shift freelancers to project-based pay rather than retainers. - **Stress:** Negotiate a 30-day rent deferral or reduce owner drawings by 50%. ## 8. Follow-Up Questions - Are there any one-off annual software renewals due in the next 90 days? - What is the specific value of current aged debtors (invoices older than 60 days)? **Next steps** - Update your 90-day projection with specific invoice due dates rather than averages. - Review your freelancer contracts to see if notice periods allow for rapid scaling down. - Verify your next tax filing date to ensure the $20k balance isn't already committed.