treasury-and-liquidity

# Treasury and liquidity Profitable companies fail on cash. Earnings are an opinion arrived at through accruals; cash is a balance you either have on the day or do not. ## Forecast cash directly The indirect method — net income adjusted for non-cash items — is right for reporting and nearly useless for operating. Build a direct forecast of receipts and disbursements by week, from actual expected timing. Thirteen weeks is the working horizon: long enough to act, short enough to be accurate. Roll it weekly and **compare last week's forecast against what happened**. A forecast never checked against outturn does not improve, and its errors are the most useful information it produces. Model timing, not just amount. A receipt that arrives four days late is the same money and a different liquidity position. ## Runway is a decision variable Runway is cash divided by net burn, but the useful version is scenario-based: the plan, a downside where revenue underperforms, and the case where a large receivable slips. Know your decision points in advance — the date by which a raise must start, the date a cost reduction must be committed to take effect in time. Decision dates always precede the cash-out date, often by more than people assume, and discovering that late removes the good options. ## Working capital is free financing, or a leak Cash is trapped in the cycle between paying for inputs and being paid for output: - **Receivables** — invoice promptly and accurately; disputed...