Ecom CFO Notebook – cashflow

Welcome to this issue of Ecom CFO Notebook – a weekly letter for 7–9 figure ecommerce founders and CFOs, sharing my perspective and stories for profitable growth.

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Sam here.

If there’s a central theme I’ve heard in the last 15 sales calls I’ve taken with prospective clients, it’s cash flow.

“I don’t know where my cash is going.”

Owners think they have cash visibility because they check their bank balance and review their P&L. But when it comes time to make decisions like how much inventory can I afford, how fast can I grow, and should I hire that person…answers are harder to come by.

Not knowing where cash is going means bad decision making – either playing it too safe and miss revenue opportunities, or overextending and creating death spirals.

This problem is surfacing everywhere right now.

Revenue’s flat to marginally up for most companies. Contribution margins are getting squeezed. Tariff bills are hitting before inventory even reaches the warehouse.

So, for the month of October, we’re doing a mini series on cash flow and cash flow forecasting.

The right tool for the right job

Your P&L tells you if you’re profitable. Your balance sheet shows your financial position at a point in time.

Neither tells you if you’re going to run out of cash next month.

Which brings us to the 13-week cash flow forecast. This tool answers one critical question: How will my cash change over the next 13 weeks? Not revenue. Not profit. Cash.

You can be profitable and still go broke.

So where to start?

Objectives, inputs, outputs

I like to break down cash flow forecasting through a simple framework of Objectives, Inputs, and Outputs.

Objectives are why you’re doing this in the first place. 

It’s important to identify your maximum cash deficit and figure out how to avoid it.

That’s it. Everything else flows from that core objective. Maybe avoiding the deficit means negotiating better payment terms with suppliers. Maybe it’s temporarily pulling back on ad spend. Maybe it’s taking out a line of credit before you actually need it.

And to achieve the objective, you need the right inputs.

Inputs are what goes into building the forecast. 

The sources of truth are everywhere cash actually moves in your business. Bank accounts, credit cards, credit facilities, financing obligations.

What makes this critical is completeness. You need visibility into all cash movements – both what shows up in your accounts today and the future obligations that will hit weeks from now. Missing either piece gives you an incomplete picture.

Your bank account doesn’t know you just placed a purchase order with your supplier.

It doesn’t know you’re planning to hire someone next month or that you’ve committed to larger ad spend. But all of those decisions will hit your cash in the coming weeks. The forecast has to capture what your statements can’t see yet.

Output is what the forecast actually tells you. 

All we are looking for is clear visibility into how your cash will change over the next 13 weeks.

Most founders think they already have this. They look at their bank balance, check their P&L, and assume they understand their cash position. But your P&L and balance sheet are always historical. They tell you what already happened, not what’s coming.

The cash flow forecast is forward-looking. It shows you problems weeks before they hit so you can actually do something about them instead of just reacting.

This is where the forecast becomes a decision-making tool. You can model different scenarios and see exactly how each choice impacts your cash position. What happens if you push that purchase order back two weeks? What if you split a large order into smaller ones or temporarily cut ad spend?

The forecast shows you the trade-offs before you commit to any path.

Why 13 weeks?

People get confused on why 13 weeks.

There’s two parts to it: the “13” and the “weeks.”

13 weeks is long enough to be useful but short enough to be directionally accurate. Most ecommerce lead times run around 90 days, give or take. Beyond that timeframe, cash becomes much harder to forecast with any real precision. Too many variables and unknowns.

The “weeks” part matters because months don’t give you enough granularity. A lot can change within a month. Your ending cash balance for the month might look fine on paper. But there could be a cash deficit in week two that kills your business before you get to the end of the month.

You don’t need perfect financials

Biggest misconception I hear.

If your books are solid and you’re pushing bank transactions through weekly, great. We can automate more of the process and tie everything together cleanly.

But if your books are a mess, it’s still totally possible to build an accurate forecast. Takes more manual work because we’re essentially rebuilding the financials from scratch using bank statements and credit card data as our sources of truth.

Not ideal. But not impossible. And sometimes more accurate than trying to rely on financials that haven’t been updated in months.

What’s next

This is just the introduction to a three-part series on cash flow forecasting.

Next up I’ll walk through the actual mechanics of how this works and who owns what parts of the process. There’s a right way to divide responsibilities that makes this sustainable instead of overwhelming.

The following weeks we’ll dive into more advanced topics like running scenario analyses and automating parts of the process.

But the foundation has to come first. Until you understand what this tool is designed to do and why it’s different from your other financial reports, the tactical stuff won’t make sense.

I’m excited to dig in over the next several weeks. If you have any specific questions on cashflow, hit reply and I’ll be sure to address them.

— Sam

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