You need cash forecasts.
One forecast isn’t enough.
You need three scenarios.
You need conservative, realistic, and aggressive.
Three cash forecasts. Multiple scenarios. Range of outcomes. Your planning.
This guide shows you how.
Conservative forecast. Realistic forecast. Aggressive forecast. Your preparation.
Read this. Build three forecasts. Plan for range.
Key Takeaways
- Conservative forecast—assume lower revenue, higher expenses, and slower collections for worst-case planning
- Realistic forecast—use expected revenue, normal expenses, and typical timing for base-case planning
- Aggressive forecast—assume higher revenue, lower expenses, and faster collections for best-case planning
- Use all three—compare scenarios to understand range of outcomes and plan accordingly
- Update regularly—revisit all three forecasts monthly as actual results come in and assumptions change
Table of Contents
Why Three Forecasts
Three forecasts show range.
What happens with one forecast:
- Single point estimate is often wrong
- Range of outcomes is unknown
- Planning is based on assumptions
- Surprises are common
What happens with three forecasts:
- Range of outcomes is visible
- Planning accounts for uncertainty
- Decisions are more informed
- Surprises are anticipated
The reality: Three forecasts enable better planning.
Conservative Forecast
Build conservative forecast:
Lower Revenue Assumptions
What assumptions to use:
- 10-20% below expected revenue
- Slower customer acquisition
- Lower average deal size
- Higher churn rates
Why it matters: Conservative revenue shows worst case.
Higher Expense Assumptions
What assumptions to use:
- 10-20% above expected expenses
- Unexpected costs included
- Higher cost of goods sold
- More overhead
Why it matters: Higher expenses show worst case.
Slower Collections
What timing to assume:
- Longer payment terms
- More late payments
- Higher bad debt
- Slower cash conversion
Why it matters: Slower collections reduce cash.
Pro tip: Build conservative forecast. Lower revenue, higher expenses, slower collections. Use our Cash Flow Forecast Calculator for easy modeling. See our cash flow scenario planning guide for comprehensive modeling.
Realistic Forecast
Build realistic forecast:
Expected Revenue Assumptions
What assumptions to use:
- Based on historical trends
- Expected growth rates
- Normal customer acquisition
- Typical deal sizes
Why it matters: Realistic revenue shows base case.
Normal Expense Assumptions
What assumptions to use:
- Based on historical spending
- Expected cost increases
- Normal operating expenses
- Typical overhead
Why it matters: Normal expenses show base case.
Typical Collections
What timing to assume:
- Standard payment terms
- Normal collection rates
- Typical bad debt
- Expected cash conversion
Why it matters: Typical collections show base case.
Pro tip: Build realistic forecast. Expected revenue, normal expenses, typical collections. Use our Cash Flow Forecast Calculator for easy modeling.
Aggressive Forecast
Build aggressive forecast:
Higher Revenue Assumptions
What assumptions to use:
- 10-20% above expected revenue
- Faster customer acquisition
- Higher average deal size
- Lower churn rates
Why it matters: Higher revenue shows best case.
Lower Expense Assumptions
What assumptions to use:
- 10-20% below expected expenses
- Cost efficiencies realized
- Lower cost of goods sold
- Less overhead
Why it matters: Lower expenses show best case.
Faster Collections
What timing to assume:
- Shorter payment terms
- Fewer late payments
- Lower bad debt
- Faster cash conversion
Why it matters: Faster collections increase cash.
Pro tip: Build aggressive forecast. Higher revenue, lower expenses, faster collections. Use our Cash Flow Forecast Calculator for easy modeling.
Using All Three
Use all three forecasts together:
Compare Scenarios
What to compare:
- Cash positions across scenarios
- Runway differences
- Funding needs
- Risk levels
Why it matters: Comparison shows range.
Plan for Worst Case
What to plan for:
- Conservative scenario as baseline
- Ensure survival in worst case
- Build buffers
- Prepare contingencies
Why it matters: Worst-case planning prevents failure.
Optimize for Best Case
What to optimize for:
- Aggressive scenario as stretch goal
- Plan for growth opportunities
- Scale resources
- Capture upside
Why it matters: Best-case planning enables growth.
Pro tip: Use all three. Compare scenarios, plan for worst case, optimize for best case. See our cash flow scenario planning guide for comprehensive modeling.
Updating Regularly
Update all three forecasts regularly:
Monthly Updates
What to update monthly:
- Actual results vs. all three forecasts
- Adjust assumptions based on reality
- Revise future months
- Improve accuracy
Why it matters: Regular updates maintain relevance.
Track Accuracy
What accuracy to track:
- Which scenario was closest
- Patterns in variances
- Areas needing improvement
- Better assumptions
Why it matters: Tracking improves future forecasts.
Refine Assumptions
What assumptions to refine:
- Revenue assumptions
- Expense assumptions
- Collection timing
- Other key drivers
Why it matters: Refinement improves accuracy.
Pro tip: Update regularly. Monthly updates, track accuracy, refine assumptions. See our monthly financial review guide for routine.
Your Next Steps
Build three forecasts. Compare scenarios. Update regularly.
This Week:
- Review this guide
- Build conservative forecast
- Build realistic forecast
- Build aggressive forecast
This Month:
- Compare all three scenarios
- Plan for worst case
- Optimize for best case
- Update with actual results
Going Forward:
- Update all three monthly
- Track accuracy
- Refine assumptions
- Use for decisions
Need help? Check out our Cash Flow Forecast Calculator for easy modeling, our cash flow scenario planning guide for comprehensive modeling, and our monthly financial review guide for routine.
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Sources & Additional Information
This guide provides general information about maintaining three cash forecasts. Your specific situation may require different considerations.
For cash flow forecasting, see our Cash Flow Forecast Calculator.
For cash flow scenario planning, see our Cash Flow Scenario Planning Guide.
For monthly financial reviews, see our Monthly Financial Review Guide.
Consult with professionals for advice specific to your situation.
