Cash-based or model-based planning: the difference that decides how good your forecast is

There are two ways to answer "how much money will I have in March", and the difference between them is the difference between a forecast you look at and a forecast you decide with.

The first way reads what has already happened — money that has landed, invoices that are out, standing costs — and carries it forward. Call it cash-based planning. The second builds the numbers from the things that create them: orders, average order value, cost rates, headcount. Change one of those and everything downstream recalculates. Call it model-based planning.

Almost every tool, template and spreadsheet you'll meet is one or the other. Knowing which one you're holding tells you exactly what it can and cannot answer.

Cash-based planning: what happens if nothing changes

A cash-based forecast estimates the cash coming in and the cash going out for each future period, then carries the running balance forward. It is the oldest and simplest shape in finance, and every liquidity tool on the market is built on it:

Note what the blue cells are: typed numbers. Every one of them is a judgement someone made — "sales collected will be €38,000 in March" — and nothing in the sheet knows where that judgement came from. It is not wrong. It is just an assumption wearing the costume of a calculation.

This shape is genuinely good at one thing, and it is the thing that keeps companies alive: timing. Rent, payroll, a VAT payment and an inventory reorder do not spread themselves evenly across a month; they hit on specific days. A cash-based view lines money in against money out, period by period, and shows you the exact week the balance dips.

Model-based planning: what happens if something changes

A model does not ask you for a revenue total. It asks for the things that produce the revenue total, and calculates the rest:

That is the whole idea. A model is a set of linked calculations that turn your drivers — the handful of inputs that actually move your business — into projected revenue, costs, profit and cash. Because the links are real, a question like "what if we raise the ad budget by €3,000 in March" has an answer instead of a debate.

The difference, side by side

The trap is that both produce a chart that looks like the future. Only one of them is the future in a form you can change.

Why so many tools are cash-based — and what it costs you

Reading a bank feed is easy. Modelling a business is not, because it means knowing something about the business: that revenue is orders × average order value, that a restock is a dated outflow that scales with sales, that an ad budget only pays back at a certain margin. So most tools stop at the bank: they classify what has already moved, project the standing items forward, and draw a line.

That line is honest about the past and mute about every decision you are actually weighing. You can see that cash gets tight in week six. You cannot see whether moving the reorder a week later fixes it, because the reorder is a number someone typed, not a consequence of anything.

Horizon is a separate question

"13-week or 12-month" gets discussed as though it were the same choice. It isn't. The horizon says how far ahead you look and how finely you slice it; the basis says where the numbers come from. You can run a 13-week cash-based sheet or a 13-week model — and the second one is far more useful.

If cash is tight right now, start with the 13-week view — it is the one that keeps you solvent. If you are planning the year, budgeting or raising, start with the 12-month. The healthiest setup runs both, with the 13-week nested inside the first quarter of the 12-month, and the same drivers feeding each — orders, average order value, costs — just sliced into weeks or months. That last part is only possible on a model. Two cash-based sheets are two sets of typed numbers that will disagree with each other by the end of the month.

What a model actually contains

Bigger models add the three statements — P&L, cash flow and balance sheet — linked together. Most founders never need that. Revenue, costs, timing and cash is enough to plan runway and test decisions, and it is the part that pays for itself immediately.

How to start

From a template. You do not need to build one from a blank sheet. Our free cash-flow forecast templates are driver-based: the assumptions sit in their own block, and the months are formulas. Open one, change an assumption, and watch it recalculate — that is the difference this whole article is about, in about four seconds.

Automatically. The catch with any spreadsheet is that it is only as current as your last update. That is tolerable for a monthly plan and painful for a rolling weekly one. Foreqast builds the same model from your real data — accounting, bank, Shopify, Stripe, ad platforms — and keeps the drivers current on their own, so the model is live rather than a monthly chore. You still change assumptions to test a decision; you just never retype what already happened.