Net 30 Is a Lie

👋 Hi, it’s CJ Gustafson and welcome to Mostly Metrics.

Tutorial number four in our series on Claude and Excel. (Haven’t installed Claude for Excel yet? Here’s the 5-minute setup.)

A couple weeks back my CFO buddy Brian Weisberg reminded me how important collections timing is for a typical B2B software company. Even if you’re profitable on the P&L, it’s very possible to be cash poor on a working capital basis. This problem is exacerbated if you have venture debt and need to maintain a minimum cash balance, and a whale or two of a customer deciding to drag their feet on an annual payment trips you into default.

So forecasting near-term cash is more about predicting when money actually enters and leaves the building rather than when deals actually close (a sticky wicket of a problem).

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As someone who used to deal with Fortune 500 Auto suppliers as his customers, the answer is almost never what’s printed on the invoice. Even if your contract says Net 30, your customer hasn’t paid in thirty days since the Obama administration. They pay in fifty-five, sometimes seventy.

Net 30 is a lie, and yet we keep telling it to our forecast.

So I built a fake company called Meridian Software. And I recorded myself building a full 13-week rolling cash forecast for it, live, from eight messy data sources, using Claude and Excel.

What’s really cool about having AI to help with this exercise is we can incorporate signals from multiple areas of the company to make the forecast as realistic as possible. AI is great at synthesizing data points (that sometimes even disagree with each other) from places like bank accounts, payroll files, AR open invoices, AR collections history (how does this customer actually behave?), AP vendors, and a whole bucket of other random outflows that tend to slip through the cracks (don’t forget about D&O insurance, or that management team offsite you gotta pay for!)

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