Liquidity scenario planning: building best, base and worst case

A single cash flow forecast answers one question: what does the most likely path look like? The more important question is usually a different one — how bad could it get, and at what point do I need to act? That is exactly what scenario planning does: it reruns the same forecast under different assumptions and turns a single number into a range.

This guide sets out what scenario planning means in cash flow forecasting, how to derive a best, base and worst case from an existing forecast, which assumptions should vary — and which should not — and how to use the scenarios day to day instead of running them once and filing them away. The underlying forecast itself is covered in the cash flow forecasting guide.

What scenario planning means in cash flow forecasting

Scenario planning means running a cash flow forecast more than once, each time with a different set of assumptions. The structure stays identical — the same weeks, the same categories, the same method — only the assumptions behind the uncertain line items differ between versions. Three scenarios are standard:

• Base case: the assumptions you currently consider most likely — the baseline of ongoing planning.
• Best case: a more optimistic but still realistic variant — receipts land on time, a prospective deal closes.
• Worst case: the assumptions that apply if things go badly — a large customer pays late, an expected order slips or falls through.

The distinction from a plain forecast matters: a forecast states what will happen. Scenario planning states what could happen, and how far the outcomes diverge depending on the assumption. The two complement each other; scenario planning always sits on top of an existing forecast, it does not replace it.

Why a single number is not enough

A 13-week cash flow forecast with one line answers “what is the most likely low point?” — but not “how low could it go if two uncertainties hit at once?” For management, that second question is usually the more relevant one, because it determines the room to manoeuvre: does the credit line still cover the adverse case, or does the bank conversation need to happen now?

The difference shows up most clearly when several uncertainties coincide — a seasonally weak month lines up with a customer overrunning their payment term while an expected order slips. Individually, none of these deviations is dramatic; together, they can move the low point significantly. How a single weekly forecast makes that low point visible in the first place is covered in the 13-week cash flow forecast guide; scenario planning goes one step further and shows how that low point shifts when several assumptions move at once.

Building best, base and worst case

The build always follows the same pattern: take the existing 13-week forecast as the base case, identify the uncertain line items, and rerun the same structure for best and worst case by changing only those items. Everything else — the fixed-cost base, already-dated open items, legally dated deadlines — stays unchanged across all three versions.

A simplified example with generic figures (not real data) shows the principle for the low point of a 13-week forecast:

The base case stays the figure you steer by day to day. Only the best and worst case show the range around it — and with it, whether the worst case would still be covered by the free credit line or would breach it. This is exactly where the 13-week forecast generator comes in: it builds the base forecast from your open items and account balance, the foundation variants like the ones above get built on.

What to vary — and what not to

The most common mistake in practice is varying too much and losing comparability as a result. A clean scenario setup draws a hard line between line items that are genuinely uncertain and those that are fixed.

Vary these:

• Receipts from new business — deals that are not yet firmly committed.
• How reliably existing customers pay — whether agreed payment terms are kept or overrun.
• Timing of large one-off payments — a project completion or deposit whose exact receipt date is not yet fixed.
• Planned but not yet committed investments or purchases.

Do not vary these:

• The fixed-cost base — payroll, social security contributions, rent, leasing, insurance and loan repayments fall due regardless of how business performs.
• Already-dated open items — invoices with a fixed due date are not a source of uncertainty, they are a known quantity.
• Legally dated payment deadlines — tax instalments and payroll tax filings (in Germany, for instance, the quarterly VAT advance payment or payroll tax return — Umsatzsteuer-Vorauszahlung, Lohnsteuer-Anmeldung) don’t shift with how business is going; they shift with the calendar.

This separation is why scenario planning has to sit on top of a clean base forecast: only once the fixed-cost base is fully and correctly captured can the uncertainty be concentrated on the line items that are actually variable. How that fixed-cost base comes together, and why it never shows up in an open-items list, is covered in the cash flow forecasting guide.

Using scenarios day to day

A scenario run once and filed away loses its value fast — assumptions from six weeks ago say little about the coming week. Scenario planning earns its keep in ongoing use, through three elements:

Define trigger points. Decide in advance which signal should switch your behaviour from base-case to worst-case mode — a specific overdue receipt, say, or credit-line utilisation above a threshold you set yourself. That way the response is thought through ahead of time rather than decided in the moment. How an acute cash flow shortage differs from a temporary deviation, and which levers apply then, is covered in its own guide.

Tie it to the rolling forecast. Scenarios are not a one-off document; they get refreshed every week as new information comes in and the best- and worst-case assumptions shift. How that weekly roll-forward works in practice is covered in the rolling cash forecast guide.

Use it in the bank conversation. A bank that sees the worst case and the countermeasures that go with it, alongside the base case, assesses a financing request differently than it would a single, uncommented number. Scenario planning doubles as evidence of due diligence — relevant if a shortage ever hardens into something more serious.

The limits matter as much as the benefit: scenario planning makes a range visible, it does not predict which scenario will actually happen. And it is only as good as the forecast underneath it — three variants built on a patchy data basis produce three patchy results, not a more reliable answer.

Frequently asked questions

The most important questions on liquidity scenario planning are gathered at the end of this page.

Frequently asked questions