Plain definition
Cash scenario planning tests how specific, plausible changes in operating conditions would affect future cash.
A sound model uses a base case, an upside case, and a downside case. Each case changes identifiable drivers—not arbitrary percentages.
Drivers may include customer payment timing, sales volume, supplier costs, a major capital payment, or the date financing becomes available.
Worked example
Monetary examples use Saudi riyals (SAR). The same principles apply in other currencies.
In the base case, the lowest forecast cash balance is .
The downside case assumes an customer payment is delayed beyond the forecast period.
| Base-case minimum cash | |
|---|---|
| Delayed customer payment | |
| Downside minimum cash |
| Minimum cash buffer | |
|---|---|
| Downside minimum cash | |
| Shortfall against the buffer |
This is not automatically a funding gap.
Why it matters
A shortfall reduces protection.
It signals liquidity pressure—not automatically a funding gap—before financing choices are considered.
Scenarios make uncertainty operational.
They show which event would reduce cash, when it would happen, and how much room remains to act.
Practical consequence
Build scenarios around three to five high-impact drivers.
For every scenario, state the period, changed assumption, trigger, owner, and planned action.
If a scenario falls below the buffer, test available cash, timing, committed facilities, and management actions before deciding whether additional financing is needed.
Do not average scenarios unless probabilities are explicit and defensible. An expected value does not replace a liquidity plan.
Try your own numbers
Map expected cash in and out week by week, then see the lowest point before it arrives.
13-week cash-flow forecast