Going concern cash flow forecast: inputs and checks

A going concern cash flow forecast tests whether a company can meet obligations when they fall due over management's assessment period. Build it from available cash and dated receipts and payments, then compare the base case with supported downside assumptions and separately identified management actions. The forecast supplies evidence; management owns the going-concern conclusion and related disclosures.

Set the assessment period before building the schedule

For a US GAAP assessment under ASC 205-40, cover one year after the financial statements are issued, or available to be issued when applicable. The SEC's going-concern discussion in CF Disclosure Guidance Topic 9A describes the issuance-based horizon and says the initial evaluation excludes potential mitigating effects of management plans that have not been fully implemented. Although published during the pandemic, that discussion identifies the underlying accounting guidance rather than a special forecast formula.

For example, a December 31, 2026 balance sheet with statements issued February 15, 2027 requires an assessment reaching February 15, 2028. Do not stop the schedule at December 31, 2027. Update the forecast for information known and reasonably knowable at the assessment date, including actual cash movements since year-end.

A monthly schedule can establish the longer view. Expand tight months into dated payments and receipts or a 13-week cash forecast. Month-end cash can be positive even when payroll falls before a major collection. Keep the same opening balance and assumptions when connecting the detailed schedule to the monthly view.

Gather the files and identify their owners

Start with the reconciled bank balance. Identify restricted amounts separately so the available opening cash does not include funds that cannot settle the obligations being tested.

Use the ordinary cash flow forecast method for constructing receipts and payments. If the starting point is a projected P&L, use an indirect cash flow forecast and reconcile its balance movements to these payment schedules. This review adds assessment evidence and scenario scrutiny to that underlying cash work.

Work the base case and a collection downside

Consider an illustrative US distributor with opening available cash of $300,000 and a management cash buffer of $100,000. The following quarter is an excerpt from its full assessment schedule. Payments are positive outflows; all amounts are whole USD, with no rounding required.

With headers in row 1 and these columns in A:H, enter the following Excel formulas. Column B's first opening balance is the reconciled input; subsequent openings link to the prior close.

F2=B2+C2-D2-E2
H2=F2-G2
B3=F2

Copy the closing and headroom formulas down, and link March's opening in the same way. The total row deliberately combines summed flows with the final balances; it does not sum opening cash, closing cash or headroom.

Now move $80,000 of February collections to April, beyond the displayed excerpt. No operating payment or debt date changes. The delayed amount remains in projected receivables until collected.

The minimum monthly headroom falls from $10,000 to negative $70,000. Cash remains positive at those month-ends, so the result identifies a buffer breach rather than proving unpaid obligations. Treasury must inspect the payment dates within February and March. A cash flow forecast chart can help show where the pressure starts.

Separate funding evidence from the cash arithmetic

Suppose management proposes a February borrowing of $90,000, with no repayment during the excerpt. Show its effect separately:

February cash is $30,000 + $90,000 = $120,000; March cash is $50,000 + $90,000 = $140,000. Subtract the buffer to obtain headroom. The cumulative column is one proposed borrowing carried forward, not a second March receipt.

Keep that version labeled as a proposed-action case. Retain the unmitigated downside beside it. Document who approves the borrowing, when funds could arrive, what conditions must be met and whether repayment or interest creates later cash needs. The arithmetic shows the proposed effect; it does not establish that the funding can be relied upon for the accounting assessment.

Prove the schedule before discussing the conclusion

The base case must reconcile as $300,000 + $680,000 - $750,000 - $100,000 = $130,000. The downside must reconcile as $300,000 + $600,000 - $750,000 - $100,000 = $50,000. The difference between those closing balances is exactly the delayed $80,000 collection.

In the base-case spreadsheet, this Excel check must return zero:

=B2+SUM(C2:C4)-SUM(D2:D4)-SUM(E2:E4)-F4

Microsoft documents SUM as adding values and ranges. Also check input cells for text, because ignored text amounts can leave a total incomplete. Covirage is not affiliated with Microsoft.

The controller should retain the reconciliations, assumption dates, scenario explanations and funding evidence with management's assessment. Cash headroom supports that assessment alongside other relevant conditions and events.

Where it goes wrong

• Stopping at year-end. The forecast must cover the applicable issuance-based assessment horizon, with current information incorporated.
• Counting unavailable cash. Restrictions and undrawn facilities with unmet conditions can overstate resources available for obligations.
• Offsetting a delay with invented savings. Moving collections later does not automatically move supplier or payroll dates.
• Treating proposed funding as settled. Preserve the case before management actions and evaluate the supporting evidence separately.
• Reading monthly cash as a conclusion. A positive closing balance can hide a shortfall within the month or obligations absent from the file.

Review your supplied cash forecasts in Covirage

Bring a workbook of your base and downside forecasts, actual cash movements and supporting balance schedules to Covirage. Covirage maps the columns; its tools compute and check the figures, and the external AI model explains the results with every figure traced to its rows. Management retains responsibility for assumptions, the accounting assessment and disclosures.

Create a free Covirage account and bring a sample of your own data.

See Covirage for finance teams for the supporting business context.