A startup can enter January with an approved budget, a growing order book and enough cash to fund its plans—and discover by summer that customer payments are arriving later than expected.
The sales may still be real. The customers may still intend to pay. Yet the company’s hiring and supplier commitments continue in the meantime, and a forecast that looked comfortable at the beginning of the year can become difficult to finance.
The International Monetary Fund’s October 2026 World Economic Outlook projects global growth of 3.4% in 2027, while identifying risks including renewed trade tensions, conflict and changes in expectations around AI investment. A global forecast is useful context, but it cannot tell a founder when a particular customer will pay an invoice or whether a key supplier will increase its prices.
That is why I would treat the annual budget as a starting point for decisions, rather than a single prediction to be defended throughout the year. A second scenario can show what happens when several assumptions prove wrong at the same time—and whether management can respond early enough.
A profitable order book can leave a cash gap
Consider a hypothetical software startup preparing its 2027 budget. It begins January with €360.000 in cash and expects to collect €720.000 from customers during the year. Planned cash expenditure is €900.000.
Under those assumptions, the business ends December with €180.000:
| 2027 cash forecast | Base case | Combined downside case |
|---|---|---|
| Opening cash | €360.000 | €360.000 |
| Customer receipts during 2027 | €720.000 | €600.000 |
| Cash expenditure during 2027 | −€900.000 | −€960.000 |
| Closing cash | €180.000 | €0 |
In the downside case, €120.000 of payments expected in 2027 arrive in 2028 instead. The sales are still assumed to go ahead, but the cash arrives later. At the same time, supplier and operating payments are €60.000 higher than planned.
These numbers are illustrative. They assume no new financing, tax differences or other cash movements beyond those shown. The downside is not presented as a prediction; it is a test of what would happen if both pressures occurred.
The difference between the two closing balances is €180.000. Two-thirds comes from delayed customer receipts, while the remaining €60.000 comes from higher expenditure. A founder who looks only at the sales forecast could miss most of the problem.
For this example, assume receipts and expenditure occur evenly through the year. The base case consumes €45.000 of cash each quarter, leaving €270.000 at the end of June. The downside case consumes €90.000 a quarter, leaving €180.000 at the same point and exhausting cash at year-end.
Real payments rarely arrive that evenly. Payroll dates, quarterly tax payments, annual software contracts and large customer invoices can make the lowest cash balance occur before December. The annual table identifies the exposure; a monthly forecast shows when the company must act.
Decide what would change before the forecast changes
Suppose the startup plans to recruit two employees in July at a combined cash cost of €20.000 per month. Their six months of cost are already included in both budgets above.
If management decides at the end of June to defer both hires until 2028, the downside scenario’s 2027 expenditure falls by €120.000. On the stated assumptions, that would leave €120.000 at year-end instead of zero.
That calculation does not make deferral the right decision. The new employees may be needed to implement customer contracts, and postponing them could delay additional receipts. Those effects must be added before the revised plan can be trusted.
A more useful discussion separates the roles. If one hire is needed to serve an existing customer and the other supports an expansion into a market where demand remains uncertain, management may decide to proceed with one and defer the other. At €10.000 a month per role, delaying one hire for six months would save €60.000 of 2027 cash under the example’s assumptions, before any related commercial effects.
The decision also needs a date. If recruitment requires several months of notice and interviews, waiting until cash is already below a comfortable level may leave little room to change course.
I would therefore put the trigger beside the forecast: for example, review the July hiring plan if actual end-of-June cash falls below €200.000. That threshold is a management choice in this example, not a universal rule. The team should agree on it while there is still time to assess customer commitments and the consequences of postponement.
Turn the economic outlook into specific assumptions
The European Central Bank’s September 2026 projections projected euro-area inflation of 2.5% and growth of 1.4% in 2027. The ECB also described the outlook as highly uncertain and considered different paths for the energy shock.
A startup does not need to reproduce an economist’s model. It does need to understand which parts of its own budget are exposed to those conditions.
For a business selling to manufacturers, higher energy costs may affect customers’ willingness to commit to a new project. For an AI company, the relevant exposure may be a supplier contract denominated in dollars or a rise in processing expenditure as customers use the product more heavily. A consumer business may be more concerned about the rate at which customers renew subscriptions.
Those risks call for different tests. Applying a uniform percentage increase to every cost may be convenient, but it can hide the contract or customer relationship that would actually create a cash shortage.
A practical forecast identifies the assumptions with the largest effect on cash: payment dates for major customers, the timing of hires, supplier renewal terms and any financing the business expects to receive. Each assumption can then be reviewed against evidence as the year progresses.
Review the plan while choices remain open
The point of the downside case is not to persuade every startup to reduce spending. A company with strong demand and adequate financing may decide to invest through a difficult period. The budget should show what that choice requires and how management will recognise if the assumptions supporting it have changed.
At the monthly review, I would compare actual receipts with the dates in the cash forecast, then look forward far enough to identify the next decision that cannot easily be reversed. That may be a recruitment offer, a supplier renewal or the commitment to open a new market.
In the example, the warning arrives well before the projected year-end cash balance reaches zero. Customer payments are already slower, and the July hires have not yet started. Management still has options, provided it recognises the pattern and considers the consequences of each response.
A 2027 budget cannot remove economic uncertainty. It can give founders a clearer view of the decisions they may need to make while there is still time to make them.