Learning goals

Roll cash forward month by month from the opening balance
Test every closing balance against the minimum cash covenant
Read the cushion and status rows as early-warning lines
Identify the tight months and explain the February bridge

Concepts

The roll-forward identity

The bank balance is a running total, exactly like receivables:

=C5+C6-C7

Cash Roll-Forward C8 (January closing cash): $38,000.00 opening + $57,125.00 received − $54,741.00 paid = $40,384.00. February's opening (D5) links to this cell, so the twelve months chain together with no gaps.

💡 Tips:

The FY column does not sum balances: O8 links to N8 (the December close) because a year-end balance is a point in time, not a flow. Summing balances is the classic cash-forecast bug.

The covenant test

The equipment loan requires the studio to keep at least $30,000.00 in the account while it is outstanding. Row 9 pulls that floor from Assumptions and row 11 flags each month:

=Assumptions!$C$7

Cash Roll-Forward C9: the $30,000.00 minimum cash covenant, identical every month because the floor does not vary.

=IF(C8<C9,"BELOW MINIMUM","OK")

Cash Roll-Forward C11: compares the month's closing cash to the floor. Under Base every month reads OK, and conditional formatting paints breaches red. Row 10 (cushion) quantifies the distance: $10,384.00 in January, $50,465.15 in December.

Reading the shape of the year

The Base plan never breaches, but it is not evenly comfortable: January closes at $40,384.00 — the tightest month, because the studio starts the year with two months of 2025 receivable tails and pays for the workstations. February nearly breaks even ($41,676.75) even with the $18,000.00 loan draw, because the same month spends $21,600.00 on the build-out. Cash builds through spring, dips again in August through October ($61,425.38 in September) when salaries and the camera purchase arrive, and ends December at $80,465.15.

The lesson for planning: the covenant question is not “do we breach?” but “how close is the worst month?” January is $10,384.00 from the line.

Why the covenant matters

A minimum-cash covenant is a lender's early-warning system: falling below it is a technical default that can freeze the credit line or accelerate repayment — regardless of profitability. The studio is planning profitable ($56,865.97 of FY net profit) and still has a January within $10,384.00 of its floor. That is the gap between the P&L view and the cash view, made concrete.

Practice

Fixed case: Harbor Creative Studio LLC, a four-person design studio in Austin, Texas, planning calendar year 2026. Cached numbers are the Base scenario. Pale-green cells are formulas; white cells are typed inputs. The exercise opens on the sheet this lesson teaches. Cell C8 (January closing cash) is blank: retype the roll-forward formula.

Open Cash Roll-Forward — The exercise opens on Cash Roll-Forward. Row 5 opening cash, rows 6 and 7 cash in and out (linked from Cash Flow), row 8 closing cash, rows 9 to 11 the covenant block.
Retype the closing formula in C8 — Cell C8 is empty. Type =C5+C6-C7 and confirm: it should return $40,384.00 for the January close.
Walk the chain — D5 should read $40,384.00 (prior close), D8 $41,676.75. Continue across the year: the low point is January at $40,384.00 and the year ends at N8 = $80,465.15.
Check the covenant block — Row 9 reads $30,000.00 every month. Row 10 (cushion) runs from $10,384.00 in January to $50,465.15 in December. Row 11 reads OK in all twelve months under Base.
Run the identity check — Confirm O13 (net cash flow memo) sums to $42,465.15 and that N8 minus C5 equals the same figure: $80,465.15 − $38,000.00 = $42,465.15. The roll-forward ties to the cash flow statement.

Online exercise

The spreadsheet below is editable — follow the practice steps right on this page. Steps that need ribbon menus should be done in your own Excel with the downloadable practice file.

表格加载中…

Checklist

Work through each item; when every box passes, this lesson is done:

☐ Retyped =C5+C6-C7 in C8 and it returned $40,384.00
☐ N8 December closing cash reads $80,465.15 and O5 confirms the $38,000.00 opening
☐ Row 11 reads OK in all twelve months; the cushion bottoms at $10,384.00 in January
☐ Net cash flow memo ties: O13 equals $42,465.15 = N8 − C5

💵 Lesson 14 · The cash roll-forward and the minimum cash covenant