CFOGPS · Where are we going?
When can we afford to ___?
The hire, the build, the new equipment. This is how to name the month it’s actually safe for cash.
“Can we afford it?” usually gets answered by the bank balance. The better question is when: the month a decision fits without pushing cash below the cushion you want to keep.
An approach
- Put numbers on the decision. The one-time cost, and the monthly cost or gain once it starts.
- Start from a cash forecast. Twelve to 24 months, plus the minimum cash you never want to go below.
- Try different start months. Drop the decision in and watch the lowest point in the forecast.
- Take the earliest safe month. The first month where cash stays above your cushion is the answer. Stack other decisions the same way.
- Write down what has to stay true. Collections, margin, other spending — the things that keep that month safe.
You can answer it when
- You can name the month the move is safe.
- You know what has to stay true for that month to hold.
Related
Want to work through this with us? We’ll bring the forward view.
Work through this with usA short starting guide. More detail is on the way.
