HarborView Services LLC closes the month with strong sales but the bank balance still feels tight. The business books about $900,000 of monthly sales, and 70% of those invoices go out on Net 30 terms while 30% is collected in cash at the point of service. Payroll of $95,000 runs every week and is paid the same week, rent of $28,000 is paid in week 1, beginning cash is $210,000, beginning Accounts Receivable is $630,000 with 80% current and 20% 60+ days, and beginning Accounts Payable is $260,000 on Net 45 terms. Before we calculate anything, the first decision is which business steps actually create or use cash in the next few weeks, and on what dates those cash movements hit the account. The timeline below is where we turn the story into cash dates and amounts:
Once the cash events are on dates, the next decision is whether we are measuring the operating cash cycle or the cash conversion cycle, because they answer different management questions. The operating cash cycle is the timing between doing the work and collecting from customers, so it focuses on Accounts Receivable and collections patterns in an order to cash process even when sales are profitable. The cash conversion cycle expands the view to include when we pay vendors for what we used to deliver the service, so it considers both Accounts Receivable and Accounts Payable timing.
For HarborView, inventory is not material, so we do not need an inventory days component to explain cash movement in the near term. Even as a service business, HarborView can have a cash gap because wages are paid immediately every week while 70% of revenue arrives later through collections, and Net 45 terms on payables can either relieve or worsen the gap depending on when the payment run lands. The practical decision this definition drives is what we put in the first draft of a short term cash map. If payroll and rent have fixed cash dates while collections depend on invoicing lag and customer behavior, the map must separate those drivers instead of blending them into a single average.
With definitions set, the next decision is whether the next four weeks trend toward a cash build or a cash drain, and which week is the tightest so a controller can plan around it. We estimate direction using only the lags given in the case, Net 30 for credit collections and Net 45 for vendor payments, plus the fixed weekly payroll and the week 1 rent. To keep the estimate anchored, we translate monthly sales into a weekly run rate as an explicit assumption, using a 4 week month for this quick diagnostic.
First compute the weekly sales and weekly gross profit profile, then isolate the cash receipts from cash sales versus credit sales. Monthly sales are $900,000, so weekly sales are $900,000 ÷ 4 = $225,000. Cash sales are 30% of $225,000, so weekly cash receipts from cash sales are $67,500. Credit sales are 70% of $225,000, so weekly billings are $157,500 and, under Net 30, we assume those billings are collected one week later in this 4 week approximation.
Next estimate cash payments that are not sensitive to sales in this case, then layer in payables timing as a separate line item. Payroll is $95,000 per week paid the same week. Rent is $28,000 paid in week 1. Beginning Accounts Payable is $260,000 on Net 45, so in the next four weeks we treat it as not due yet under the stated terms for this simplified window, and we flag that this choice is what we revisit once we see the pinch week.
The schedule below shows the four week cash direction using only those stated lags and fixed payments, starting from beginning cash of $210,000.
| Week | Beginning cash | Cash receipts, cash sales | Cash receipts, credit collections | Cash payments, payroll | Cash payments, rent | Net change | Ending cash |
|---|---|---|---|---|---|---|---|
| 1 | $210,000 | $67,500 | $0 | ($95,000) | ($28,000) | ($55,500) | $154,500 |
| 2 | $154,500 | $67,500 | $157,500 | ($95,000) | $0 | $130,000 | $284,500 |
| 3 | $284,500 | $67,500 | $157,500 | ($95,000) | $0 | $130,000 | $414,500 |
| 4 | $414,500 | $67,500 | $157,500 | ($95,000) | $0 | $130,000 | $544,500 |
| Total | $270,000 | $472,500 | ($380,000) | ($28,000) | $334,500 |
The decision point in this output is which week is the minimum cash balance, because that is the week we have to survive operationally even if the month ends higher. Under these assumptions, the lowest point is week 1 at $154,500, driven by payroll plus the week 1 rent landing before the first wave of credit collections. That is the cash pinch week in this simplified map, and it is also where a small change in collections timing or an unexpected payment run can cause an overdraft even when the four week total is positive.
Common error A cash map that uses accrual revenue and expense timing will miss the week 1 low point entirely.
Once we know the tight week, the next decision is what controller actions reduce the risk in that specific window without breaking vendor relationships or customer experience. A short, workable list for HarborView ties each action to a cash date on the map rather than a general goal.
The one check that proves the map is internally consistent is that every operational step we listed has an actual cash date attached. If an item has an amount but no date, it is not yet usable for a weekly cash decision, and if an item has a date but no amount, it cannot be reconciled to the bank balance. Before we change any levers, we commit to the question of which single timing assumption is most likely to move the week 1 low point: adjust the credit collection lag and see the four week cash impact here: