Write the policy from a dated disruption scenario
Prerequisites, sequence and stop points
- Name one disruption or recovery scenario, horizon, policy owner and decision purpose. (not complete)
- Define accessible reconciled cash and separately list amounts the business treats as committed or restricted. (not complete)
- List essential dated outflows and only approved optional actions; do not classify obligations in this guide. (not complete)
- Use a dated runway scenario and declared minimum closing cash; averages can hide a specific payment date. (not complete)
- Write target, warning and breach fields with an owner, evidence and escalation action rather than default percentages or colours. (not complete)
- Record permitted draws, approval, replenishment, exceptions, privacy boundaries and event-based review triggers. (not complete)
Keep cash, outflows and governance fields explicit
observed buffer days = declared accessible buffer cash ÷ declared average daily in-scope outflows; scenario target = maximum cumulative funding need + declared minimum closing cash; gap to target = accessible buffer cash − scenario target
- accessible buffer cash
- Reconciled cash the business has explicitly included in this policy (CU) — business-defined record
- average daily in-scope outflows
- Declared average for the policy observation only (CU/day) — user scenario
- maximum cumulative funding need
- Tool-owned dated shortfall for the named scenario (CU) — cash-runway scenario result
- minimum closing cash
- Business-declared scenario boundary, not an adequacy benchmark (CU) — policy assumption
Observed buffer days can describe the declared scenario but do not establish adequacy or solvency; dated outflows can make an average misleading.
| Policy field | What to record | Boundary |
|---|---|---|
| Purpose, effective date and horizon | Named disruption; policy effective date; calendar scenario window; event that starts the next review | Do not combine unrelated risks into an opaque percentage |
| Owner and approver | Policy owner, draw approver, exception approver and record custodian | Names or roles stay in the private business record, not a public copy |
| Cash definition and exclusions | Accessible reconciled cash; accounts included; committed/restricted amounts, facilities and unreconciled balances excluded or shown separately | Credit is not automatically cash |
| Outflows, scenario and horizon | Business-defined essential dated outflows; approved actions; named disruption/recovery scenario and calendar horizon | No advice to delay obligations |
| Runway scenario output | The date or elapsed time at which the unchanged dated cash line crosses the selected floor | A calculated scenario output, not a recommended target or solvency conclusion |
| Minimum buffer policy input | A business-declared cash floor selected before testing the dated scenario | A governance input, not a calculator recommendation or universal benchmark |
| Target evidence and bands | Evidence date; tool scenario version; target, warning and breach fields; escalation owner and allowed response | No universal months or percentage |
| Permitted uses and draw record | Permitted documented purpose; amount/date; evidence; approver; remaining balance; exception reference | No recommendation about which obligation or account to use |
| Replenishment and exceptions | Replenishment source/cadence, responsible owner, completion evidence and separately approved exception path | No account or investment recommendation |
| Review triggers and version note | Cost, hiring, premises, debt, contract, seasonality, concentration, payment-term, repeated-breach, forecast-error or cash-access change; record version and revision summary | Use an event-based review rather than inventing a future date |
Work a neutral-currency policy trigger
Labelled scenario
All figures are fictional governance inputs. They do not establish adequacy, safety or solvency.
| Case or record | Inputs and arithmetic | Interpretation |
|---|---|---|
| Declared scenario target | 9,000 CU scenario funding need + 1,000 CU minimum closing cash = 10,000 CU | A user-defined policy target, not a recommendation |
| Current gap | 7,500 CU accessible cash − 10,000 CU target = −2,500 CU | Triggers policy review; does not prove insolvency |
| Delayed-receipt sensitivity | Additional 1,500 CU dated shortfall in the user scenario | Update the runway and governance action; do not assume borrowing |
| Fictional date | Unchanged projected cash | 6,000 CU policy floor | 8,000 CU policy floor | Policy interpretation |
|---|---|---|---|---|
| 1 October | 12,000 CU | Above floor | Above floor | Neither policy has reached its user-defined breach point; keep the dated low point, not an average, as the test basis |
| 8 October | 7,500 CU | Above floor | Below floor: first breach | Only the higher-floor policy triggers; the underlying cash projection is still 7,500 CU |
| 15 October | 5,500 CU | Below floor: first breach | Below floor | The lower-floor policy breaches later; neither floor changes the projected cash amounts |
Review, change or retire assumptions
Use the calculation owner for the next step
- Cash Runway Planner
Identify a dated cash-buffer breach and peak funding gap
- 13-Week Cash Flow Forecast
Forecast weekly closing cash, the first shortfall and the funding gap across a 13-week operating horizon
Questions and limitations
- Is there a standard number of months?
- No universal benchmark is supplied. Use the business’s own dated scenario, minimum closing-cash boundary and governance rules.
- Does a credit facility count as cash?
- Keep it separate from accessible reconciled cash and confirm its actual terms; this guide provides no credit advice.
Sources and scope
- Manage your finances — U.S. Small Business Administration: Stable cash-management education only; no reserve benchmark adopted.
- Small-business cash flows and buffer days — JPMorganChase Institute: Definition and heterogeneity context only; published sample figures do not ship.