The 13-week Forecast Model
Carl Seidman, CSP, CPA
Helping finance professionals master data, FP&A and CFO advisory services through learning experiences, masterminds, training + community | Adjunct Professor in Data Analytics | Course Creator | Advisor | Microsoft MVP
Why is the 13-week forecast model the gold standard for cash flow planning and liquidity management?
1?? What is a 13-week cash flow forecast model
A 13-week cash flow forecast model is a short-term financial planning tool that projects cash inflows and outflows over a quarter of the year. This period of time is ideal since it likely captures near-term trends, a full cash conversion cycle, and seasonal fluctuations.
2?? Why do companies utilize these models
This tool lets companies make informed decisions, with current data, and an ability to update it weekly, monthly, or quarterly. This means the business can adapt to the changing economic or operating environment very quickly.
In the event the company loses a customer, encounters a delay in receipts, pushes out payables, or is at risk of defaulting on debt, the 13-week cash flow provides tremendous visibility and the runway for addressing problems.
3?? Why use the direct approach versus the indirect approach
The indirect approach to the statement of cash flows starts with net income, adjusts for non-cash items, and reconciles working capital balances on the balance sheet. This is far less transparent than using the direct approach, which simply shows cash receipts and cash disbursements.
4?? Why do third parties like 13-week cash flow forecasts
A 13-week cash flow forecast has detailed insights and are easy for financial and non-financial professionals to understand. Private equity firms, venture capital firms, investors, banks, and other lenders are able to quickly and easily address the financial health and well-being of the company, knowing exactly what's driving growth or distress.
5?? Why are 13-week cash flow forecasts easy to update
If built dynamically in Excel with proper structure and account coding, these short-term forecasts can be updated seamlessly. Actuals can be populated into the most recent week while the model can be rolled forward into future weeks.
6?? Can 13-week cash flows be integrated with long-term models?
Yes, 13-week cash flow forecasts may serve as the first 90 days of a 12-month or 18-month integrated 3-statement model. In other words, the cash flow model covers months one through three, while the monthly financial statements continue thereafter.
Every company can benefit from a 13-week cash flow forecast model, whether it's experiencing rapid growth, significant distress, or a turnaround and revitalization.
I recently had an interesting dialogue with Arthur on LinkedIn. I thought you might find it insightful as well.
How do you currently price your services? Has it changed much since you first started?
I began charging by engagement phase and scope of work. So I assess the first 2-3 months of work, scope it into a Phase 1, 2, 3. I provide a range of anticipated fees based upon (a) what I believe it’s worth to the client, and (b) triangulating into my internal target for rates.
I can then add in additional scopes of work as the engagement proceeds or needs arise.
How did you make the transition from working for another company to then working for yourself?
It took a while to adjust. Entrepreneurship is far more about knowing what you offer, marketing, and selling it. Working at a firm was mainly about being a doer and relying upon the Partners to bring in the work.
But I grew a bit irritated that the Partners were making so much money and not doing so much while I was doing all of the work. I am now responsible for hunting and harvesting, which is a lot of work, but I get to direct my business and own my days.
How do you acquire clients? Is it different now than when you first started?
Yes. I used to rely 100% on referrals and word-of-mouth. Great to have that. But referrals don’t always come in. So I’ve had to focus a lot more on marketing, speaking at conferences, connecting through intros within my network, LinkedIn content, writing, webinars, etc. I also have a flywheel that allows me to get consulting work from training, training from speaking, speaking from podcasts, podcasts from LinkedIn, etc.
What specific advice would you have for finance folks transitioning from the corporate world to fractional CFO work for the first time?
Determine the limited services you’re absolutely great at. Find the sector or type of companies that need you. That all means niching down. Get really good at that niche before expanding wider.
Depending on your financial circumstances, find one or two very reliable sources of income such as a long-term client, affiliate partnership, training, etc that gives you a steady baseline of revenue. That way you have the flexibility to take on and turn down the consulting or fractional CFO work. Unless you’re with the same clients month after month after month after month, you’re likely to have peaks and troughs in your calendar and revenue. Having that baseline helps weather those fluctuations.
What tools and technologies (other than excel and google sheets of course) are indispensable to your work now?
Accounting/invoicing/expense software. I use Zoho Books and Expensify. TripIt for travel. Dropbox for cloud file storage. Zoom for webinars and virtual training. A CRM for managing contacts and deal flow. ConvertKit for newsletter.
There are others but those are the big ones.
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Podcast: Future-Proof Your FP&A Career
In this episode of the FP&A Tomorrow podcast, host Paul Barnhurst talks with Carl Seidman about why mastering presentation skills and understanding the needs of the audience are crucial for excelling in your FP&A career.
Key takeaways from this episode include:
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Live Virtual Programs
Being a full-time CFO isn't for everyone. But being in charge of your high-performing finance career is. Learn how to do it successfully.
Program Type: Virtual
Date & Time: May 2, 7, 9, 13, 14, 20, 21 at 5 pm - 9 pm CST
CPE credits: 21-23
Learn the step-by-step approach to 13-week cash flow modeling, helping healthy companies grow and getting troubled companies back on track.
Program Type: Virtual
Date & Time: May 7, 8 at 9 am - 1:30 pm CST
CPE credits: 9
How can I help you?
We've explored the benefits and versatility of the 13-week cash flow forecast model, and it's clear why it stands as a golden standard for managing liquidity and financial planning. By integrating such a tool into your financial strategy, you can enhance decision-making processes and maintain a solid grasp on your company's future in any scenario. Don't forget to download your complimentary 13-week cash flow template, and let me know if you have questions or feedback. For more insights, follow me on LinkedIn.
Until next time,
Carl
Financial modelling and FP&A for PE portfolio companies. On a mission to support businesses to make smarter decisions. Follow me for posts on best-practice financial modelling, FP&A, and Excel tips.
7 个月This is a great summary Carl. I've been summarising the main types of financial models over the past few weeks and next week I'll be talking about the 13 week cashflow. Difficult for me to add anything else onto this summary. Perhaps emphasising that while cash is important for all businesses, it's the early stage and startups who would generally benefit the most from this type of model. Let me know what you think.
Plant Controller with FP&A | Cost Accounting | MBA & Master's in Finance | bachelor's in Administration | Startup with Shelter | Financial Modeling | Automation | BI | Maquiladora | IMMEX | IFRS | US GAAP | AI | SOX
7 个月The 13-week cash flow forecast model, as presented by Carl Seidman, CSP, CPA, is a fundamental tool for efficient financial management, especially in the manufacturing sector where cash flow is closely linked to operational efficiency and market demands. It offers a detailed perspective suitable for managing daily operations and broad enough to guide strategic planning. I possess your template and will view the accompanying video. Thank you!
Fractional CFO for fast-growing companies | 400k+ Followers | Founder & CEO of Mighty Digits
7 个月Great video Carl, your sessions look like a lot of fun! 2 questions for you: 1. How do you actualize on a weekly basis easily, given that financial data is typically closed out monthly? Do you do weekly cash recs? 2. How do you actualize cash flows under the direct method? Is that fairly manual?
CFO/VP Finance
7 个月Thank you for this post. A 13-week cash flow forecast is a valuable tool for enhancing cash management, improving forecasting accuracy, enabling responsive decision-making, managing risks, planning for liquidity needs, and fostering stakeholder communication. Incorporating short-term cash flow projections into your financial planning process can strengthen your financial resilience and position your business for long-term success.
Help business owners of $3M–$25M revenue optimize cash flow and achieve business goals | Fractional CFO w 18y of experience | AI Super User according to Washington Post
7 个月Thank you for your insights. It can be very complex to prepare the forecast using the direct cash-flow method.