Build a Cash Forecast Before Your Next Hire

Before you approve your next hire, put it in a cash forecast and find the month your cash balance is lowest.

That one number answers the question most hiring debates circle around: can we afford this person, and when does it start to hurt? The income statement cannot tell you. A cash forecast can.

Why the income statement is not enough

Your books tell you what already happened. Reliable bookkeeping is the base for every good decision, but it looks backward.

A hire is a decision about cash you have not collected yet. Salary starts on day one. Customer payments arrive on their own schedule. A profitable month on paper can still leave less cash in the bank than you expected, because revenue is recorded when it is earned and cash arrives when customers pay.

So the question is not "are we profitable enough to hire?" It is "what is the lowest our cash balance will get after we hire, and when?"

The four step forecast

You do not need a complex model to answer that. A monthly forecast covering the next 12 months, built in a spreadsheet, is enough for most hiring decisions. If cash is tight, a weekly view of the next 13 weeks gives more precision for the near term.

Step 1: Start with cash in the bank today

Use the actual bank balance, not the balance sheet from the last close. If you have more than one account, add them together. If some cash is restricted or held as a reserve you will not touch, leave it out.

Step 2: Add receipts in the month customers actually pay

Look at how your customers really pay. If wholesale customers are on 60 day terms and usually pay late, forecast what they do, not what the contract says. If you sell subscriptions billed annually, the cash comes in once a year, not every month. If you sell through a platform like Stripe or Shopify, use the payout timing net of fees.

Step 3: Subtract committed outflows