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Cashflow + Funding Stress Monte Carlo (How Money Moves)

Author: PlanExe Team
Date: 2026-02-10
Status: Proposal
Tags: cashflow, finance, simulation, liquidity, risk

Pitch

Simulate weekly or monthly cash movement under uncertainty to identify liquidity cliffs, funding gaps, and insolvency windows before execution starts.

Why

Projects fail from cash timing issues even when total budget looks sufficient. A stress simulation surfaces liquidity risk early and informs funding structure.

Problem

  • Budget totals do not capture timing risk.
  • Payment delays and drawdown constraints are often ignored.
  • Financing plans are rarely stress-tested.

Proposed Solution

Build a Monte Carlo cashflow simulator that:

  1. Models inflows and outflows over time.
  2. Incorporates stochastic delays and default probabilities.
  3. Runs thousands of scenarios to estimate liquidity risk.
  4. Produces funding buffer recommendations.

Cashflow Model

Inflows

  • milestone payments
  • investor tranches
  • grants
  • debt drawdowns

Outflows

  • labor and contractors
  • materials and equipment
  • logistics
  • compliance and legal
  • contingency

Risk Drivers

  • counterparty payment delays
  • procurement cost inflation
  • FX volatility (for multi-currency plans)
  • timeline slips affecting cash burn

Simulation Workflow

  1. Build baseline cashflow schedule.
  2. Sample stochastic events (delays, cost spikes).
  3. Compute cash balance over time.
  4. Record insolvency windows and buffer needs.

Output Schema

{
  "probability_negative_cash": 0.27,
  "min_cash_buffer": 1800000,
  "worst_case_gap": 3200000,
  "time_to_insolvency_weeks": 14
}

Policy Hooks

  • Block plan escalation if liquidity failure probability exceeds threshold.
  • Recommend tranche redesign or payment renegotiation.
  • Adjust schedule to smooth peak burn periods.

Integration Points

  • Feeds into top-down and bottom-up finance modules.
  • Informs investor risk scoring and funding structure.
  • Links to risk propagation network.

Success Metrics

  • Reduction in mid-project funding crises.
  • Better alignment between payment schedules and burn.
  • Increased confidence in funding adequacy.

Risks

  • Over-reliance on assumed distributions.
  • Underestimating black swan funding shocks.
  • Poor quality input data yields false security.

Future Enhancements

  • Scenario-specific macro stress models.
  • Automated FX hedging analysis.
  • Live cashflow tracking during execution.

Detailed Implementation Plan

Phase 1: Cashflow Model Assembly

  1. Build canonical cashflow timeline object:
  2. period granularity (weekly/monthly)
  3. inflow schedule with uncertainty bands

  4. outflow schedule from CBS and staffing plans

  5. Add uncertainty injectors:

  6. receivable delay distributions
  7. procurement inflation shocks
  8. FX movement models for multi-currency projects

  9. drawdown timing constraints for debt/grants

  10. Define insolvency rules:

  11. threshold crossing (cash_balance < 0)
  12. sustained shortfall windows (n periods below minimum buffer)

Phase 2: Stress Simulation Engine

  1. Run 10,000 stochastic scenarios with deterministic seed option.
  2. Compute key outputs:
  3. probability of negative cash by period
  4. minimum viable reserve buffer

  5. required funding bridge amount and timing

  6. Tag scenario archetypes:

  7. delay-driven insolvency
  8. inflation-driven insolvency
  9. FX-driven insolvency

Phase 3: Decision Layer + Policy Hooks

  1. Add policy thresholds configurable by domain/risk appetite.
  2. Emit recommendations automatically:
  3. resequence payment milestones
  4. increase contingency reserve

  5. add backup credit facility

  6. Integrate with bid/no-bid gate:

  7. block escalation if liquidity failure probability exceeds limit.

Data model additions

  • cashflow_scenarios (run_id, period, inflow, outflow, balance, scenario_id)
  • cashflow_risk_summary (run_id, p_negative_cash, min_buffer, worst_gap)
  • funding_actions (run_id, action_type, expected_impact)

UX/reporting

Add a dedicated report section: - cash-at-risk curve - highest-risk periods - mitigation playbook with expected probability reduction

Validation checklist

  • Reconcile baseline simulation with deterministic cashflow model.
  • Verify multi-currency translation consistency.
  • Backtest against historical liquidity incidents where available.

Detailed Implementation Plan (Treasury Readiness)

Treasury Simulation Features

  • Dynamic cash floor policy per project stage
  • Payment delay distributions by counterparty type
  • Optional emergency facility simulation

Decision Outputs

  • Minimum reserve recommendation
  • Funding bridge trigger points
  • Suggested payment milestone re-shaping

Alerting

  • Critical alert when insolvency probability exceeds configured threshold
  • Daily digest for plans in warning zone

Validation

  • Replay historical near-insolvency projects for calibration
  • Stress test with correlated shock scenarios