You’re three months into your Series A runway. Payroll’s due in two weeks, and your dashboard says you’ve got six months of cash assuming zero churn and perfect collections. Sound familiar? Our guide prepares you for this scenario and more.
A cash flow projection helps you understand what’s real, not just what’s expected in a best case scenario. It’s your early warning system and your best friend when it comes to navigating growth without panic.
This guide walks you through how to build a reliable cash flow projection for startups, avoid common mistakes, and make sharper decisions using real financial insight.
Why Cash Flow Projections for Early-Stage Startups Matter More Than Profit and Loss Projections
Here’s the honest truth: Revenue and profit don’t keep your startup alive; cash does. You might be profitable on paper and bring in tons of revenue, but if your receivables take 90 days and you’ve got payroll every two weeks, you could run out of money anyway.
Cash flow projection means looking ahead at your actual bank activity: how much cash is expected to come in the door and how much will leave. It’s your best tool for managing your cash runway and making critical timing decisions.
Let’s say your SaaS startup books $100K in new MRR. Great, right? But if you’re giving customers Net 60 and still owe $80K in ad spend and team salaries this month, that revenue doesn’t help you today. That’s where operating cash flow comes in, measuring the cash flowing from your core operations.
Another example: your startup closed a $2M round, and you budgeted for 12 months of runway. But your hiring ramped, ad costs doubled, and collections slipped. Suddenly, you’re down to 6 months. A solid projection could’ve flagged that when you could make adjustments.
We’ve also seen founders get caught off guard by tax payments, insurance renewals, or annual SaaS fees they forgot to include in their monthly burn.
According to CB Insights, 38% of startups fail because they run out of cash. Many of them were technically profitable.
For more, check out Investopedia’s breakdown of operating cash flow.
👉 Also see: The difference between revenue and profit (link to blog)
Key Components of Cash Flow Projections for Startups
Here’s a simple breakdown of what your cash flow projection should include:
| Component | What It Means |
|---|---|
| Beginning Cash Balance | Starting money in your bank account each month |
| Cash Inflows | Operating: Deposits from Customers Financing: Deposits from Equity or Debt fund raises |
| Cash Outflows | Operating: Payments for operating expenses(i.e. payroll, insurance, rent, subscriptions, etc.) Financing: Debt payments |
| Net Cash Position | Ending cash after inflows and outflows |
How do I translate my P&L Forecast into a Cash Projection?
Shouldn’t my revenue reflect the cash that I am getting from my customers?
Unfortunately, it does not. Typically, most companies are on an accrual-based accounting system for investor reporting and for tax returns. If you were on cash-based accounting, your P&L would accurately reflect the cash in and cash out. However, the related cash based balance sheet would NOT accurately reflect the current or long term obligations of the company as those obligations are not recorded until they are paid.
Here is a roadmap for a cash projection using your existing P&L and Balance Sheet forecasts:
| Component | Details |
|---|---|
| Beginning Cash Balance | Starting money in your bank account each month |
| Cash Inflows – Operations | Revenue LESS Accounts Receivable change PLUS Deferred Revenue change |
| Cash Inflows – Financing | Net Funds from Equity raises and Draws from loans |
| Cash Outflows – Operations | Operating Expenses LESS Accounts Payable change PLUS Prepaid Expenses change |
| Cash Outflows – Financing | Payments on debt |
| Net Cash Position | Ending cash after inflows and outflows |
Bold tip: Don’t forget one-time costs in your forecasts, such as legal fees, hardware, and big vendor payments. These often get missed and skew the model.
If you’re hiring aggressively or experimenting with marketing spend, include notes and flags to monitor assumptions. Simple annotations can save significant confusion later.
Common Mistakes Founders Make in Startup Cash Flow Projections
Even innovative founders get tripped up by the same blind spots:
Overestimating Revenue
You’ve got 3 enterprise deals in late stage? Great. But if they’re not signed and paid, don’t build all of them into your base case. Instead, create upside/downside scenarios.
Also, be realistic about your payment terms. If your customers consistently pay on Day 45, don’t model Day 30.
Ignoring Timing Lags
You might book revenue in April, but if you collect in June and your vendors demand payment in 14 days, your cash burn becomes painful. This is where understanding accounts receivable and accounts payable cycles is crucial.
Late payments from clients can compound quickly, especially when you’re locked into fixed costs like salaries and SaaS contracts. A timing delay of 30 days on receivables can burn through your safety buffer fast.
Things change—fast. One new hire, one delayed deal, or one vendor surprise can change everything. Review your forecast monthly and revise assumptions as needed.
Not Updating Monthly
Scenario: You raised a $1.5M seed round in December. In May, you’re assuming you’ve got 8 months of runway left. After updating the numbers, it’s closer to 5. That gap can be the difference between raising on your terms or making emergency cuts.
Our Process: Building Cash Flow Projections for Startups That Need Clarity and Control
You don’t need a full-time CFO to have a high-quality forecast. You need a process and a partner who knows what matters.
SVFG helps startups build rolling 12-month projections that update every month. These aren’t static spreadsheets. They’re decision-making tools.
Here’s how we approach it:
- Rolling updates: We keep your model alive and evolving
- Scenario planning: What if you push out a key hire? What if conversion rates fall?
- Investor alignment: We forecast with board-level expectations in mind
- Benchmarks: We compare your spending to similar-stage companies to spot red flags
- Forecast realism: We don’t sugarcoat. We show founders what they need to see, not just what they hope to see
Case story:
We worked with a SaaS startup in San Francisco that believed they had 12 months of cash. After building a dynamic model, we discovered they realistically had 8. They used that insight to tighten expenses, extend the runway, and raise at better terms—without the panic.
👉 Learn more about our fractional CFO services
👉 See how FP&A support helps you stay ahead
How to Communicate Your Cash Flow Projection to Investors
Founders often get asked in board meetings: “How much runway do we have?” What investors want isn’t just a number; they want a clear view of your assumptions and your plans.
Tips for presenting:
- Break down inflows by source (MRR vs one-time revenue)
- Highlight fixed vs. variable costs and one-time bumps in both revenue and expenses
- Share what’s driving cash burn
- Be ready to discuss scenario ranges, not just the base case or the stretch case.
A founder who understands their model builds investor confidence.
What to Do Next: A Financial Gut Check
If your model hasn’t been touched in months or you’re not confident it reflects reality, take a pause.
A 20-minute consult with SVFG could offer clarity. No pressure. Just honest insight, scenario testing, and a second set of eyes on your assumptions.
We’ve helped founders uncover 3 to 4 months of miscalculated burn, find levers they didn’t know existed, and gain the clarity that changes how they sleep at night.
FAQs: How to Build and Maintain a Cash Flow Projection for Your Startup
What’s the difference between a forecast and a budget?
A budget sets planned spending goals. A forecast reflects what’s happening and what’s likely to happen next.
How often should I update my cash flow projection?
At least monthly. Weekly if you’re burning cash quickly or preparing for a raise.
Do you work with startups outside San Francisco?
Absolutely. SVFG is based in San Francisco, but we support founders across the U.S. who need better visibility into their cash flow.
Author: Jan Reed – Cash Flow Projection & Startup Forecasting Expert
Jan Reed is a senior finance executive and Fractional CFO at SVFG with over 25 years of experience guiding high-growth startups. She specializes in building investor-ready financial models, strategic forecasting, and FP&A infrastructure that scales. Jan partners with founders to turn uncertainty into clarity—whether it’s creating a cash flow projection to extend the runway or preparing for a board meeting with confidence.
