The 13-week cash flow model is the operating system of a distressed company. It governs what gets paid, it forms the covenant in every DIP facility, and it is the document through which lenders exercise control. Learning to build one properly is the most transferable single skill in this field.
Why thirteen weeks, and why cash
Thirteen weeks is a quarter, which is long enough to capture a full cycle of receivables collection and payables settlement, and short enough that weekly line items can be forecast from actual knowledge rather than from assumption. Beyond a quarter, weekly precision becomes false.
The model is built on a direct receipts-and-disbursements basis, not on accruals. It forecasts cash actually arriving and cash actually leaving, week by week. This is a different discipline from financial forecasting: a company can report positive EBITDA and run out of cash in week six, and the 13-week model is the instrument that makes that visible.
How it is built
Rows are cash line items; columns are weeks. Receipts are typically forecast by applying collection curves to the receivables ageing — what percentage of each ageing bucket converts to cash in each forward week — plus expected new sales collections. Disbursements are broken into payroll (which has fixed dates), suppliers (by vendor category and terms), rent and leases, debt service, taxes, capex, and professional fees, which in a restructuring become one of the largest lines.
Below the disbursements sits the liquidity calculation: opening cash, net cash flow, closing cash, plus revolver availability, giving total liquidity by week. The lowest point in that row is the number that governs everything — it determines how much time exists and therefore what outcomes are reachable.
Running it weekly
The model is refreshed every week: actuals are entered for the week just closed, variance to forecast is computed by line, the forecast is rolled forward one week, and the reasons for each material variance are documented. This rolling discipline is what produces credibility over time — lenders can see whether last week's forecast held.
Variance analysis matters more than the forecast itself. A consistent negative variance in customer receipts means the collection assumptions are wrong and the runway is shorter than modelled. A timing variance that reverses the following week is noise. Distinguishing between the two, weekly, is the core of the work.
The exercise that teaches this
Every DIP financing motion in a Chapter 11 case includes the approved budget as an exhibit, and that exhibit is a real 13-week cash flow model. It is free, public, and available on any claims agent docket.
The exercise: pull a DIP motion, find the budget exhibit, and rebuild the model from the disclosed line items in a blank spreadsheet until your output ties to theirs. Not copied — reconstructed. You will have to reason about what drives each line, which is precisely the point. Do this two or three times and you will have a skill that a surprisingly small number of people possess, along with an artefact you can show.