The Smart Founder’s Guide to Cash Flow Contingency Planning

You’ve built your cash flow forecast. It looks solid. Money in, money out—no surprises ahead.

Except…business never goes perfectly according to plan.

A big customer delays payment. A critical piece of equipment fails. Sales drop during an unexpected slow season. Suddenly, your forecast becomes worthless if you didn’t plan for the unexpected.

That’s where contingency planning comes in.

In this article, we’ll show you how to weave contingency planning into your cash flow forecasting—so you’re prepared for surprises and can sleep better at night.

Why Contingency Planning Matters

Cash flow forecasts are like weather forecasts—they show the likely outcome if things go as expected.

But running a business is rarely predictable. Contingency planning means preparing for:

• Sudden revenue drops

• Unexpected expenses

• Delayed payments

• Economic shocks (think COVID, inflation)

It’s the difference between a business that weathers storms—and one that sinks.

The Cost of Ignoring “What If”

Founders sometimes avoid planning for worst-case scenarios because:

• “It’s too negative.”

• “I’ll jinx it if I think about it.”

• “We’ve never had that problem before.”

Here’s the reality:

You don’t go bankrupt from forecasting worst-case scenarios—you go bankrupt from not preparing for them.

Ignoring risks doesn’t make them less real. It only leaves you vulnerable.

How to Build Cash Flow Contingency Plans

Let’s dive into a practical process to integrate contingency thinking into your cash forecasting.

Step 1: Identify Risks

List potential threats that could impact cash flow, such as:

• Customer payment delays

• Loss of a major client

• Supplier price increases

• Equipment breakdowns

• Regulatory changes

• Economic downturns

Ask yourself: “What would keep me up at night if it happened tomorrow?”

Step 2: Model Scenarios

For each risk, create alternative forecasts:

• Best Case: Everything goes perfectly.

• Likely Case: Your normal plan.

• Worst Case: Assume revenue drops 20–30%, or major expenses hit unexpectedly.

Don’t obsess over precision. The goal is to see how your cash runway changes under different conditions. To do this you can take a copy of your existing cash flow file and then create a new one called Worst Case, Best Case. Your main cash flow file should be the Likely Case. 

Step 3: Build Buffers

A solid contingency plan includes financial buffers, like:

• A minimum cash reserve (e.g. 2–3 months of operating expenses)

• An approved business line of credit

• Extra inventory of critical supplies (if supply chain risk is high)

• Insurance coverage for major disruptions

Remember: cash is your business’s seatbelt.

Step 4: Create Action Plans

For each risk scenario, write down:

• Immediate actions you’d take

• Expenses you’d cut first

• How you’d communicate with staff, suppliers, or lenders

Having this plan in writing removes guesswork when stress levels are high.

Real-Life Founder Example

A founder running a boutique hotel in a tourist town learned this the hard way during COVID. Bookings evaporated overnight. He had no cash reserve, no contingency plan, and couldn’t cover payroll.

Since then, he:

• Keeps a 3-month cash reserve

• Maintains a rolling 13-week forecast with worst-case scenarios

• Negotiates flexible payment terms with suppliers

His words:

“Forecasting the worst felt scary. But not as scary as living through it unprepared.”

Cash flow forecasting shows you where you’re headed if the road stays smooth. Contingency planning prepares you for the potholes and detours.

Don’t wait for disaster. Build your “what-if” plans now—so surprises don’t sink your business later.

Curious how to build contingency plans into your cash flow forecast? Drop a comment or reach out—we’d love to help you protect your business from the unexpected.

 

What To Do Next

Whether you’re feeling the pinch or trying to plan your next big move, here’s how to take control:

🛠 Option 1: Do It Yourself
Grab our $47 Cash Flow Clarity Kit—a template, a training, and a guide to build your own forecast in under an hour.
→ Get Instant Access

🤝 Option 2: Done For You
Let us build your 12-week forecast, flag the risks, and show you exactly where you stand. Delivered in 7 days.
→ Book Your Forecast