---
title: "Cashflow + Funding Stress Monte Carlo (How Money Moves)"
date: 2026-02-10
status: proposal
author: PlanExe Team
---

# 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

```json
{
  "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:
   - period granularity (weekly/monthly)
   - inflow schedule with uncertainty bands
   - outflow schedule from CBS and staffing plans

2. Add uncertainty injectors:
   - receivable delay distributions
   - procurement inflation shocks
   - FX movement models for multi-currency projects
   - drawdown timing constraints for debt/grants

3. Define insolvency rules:
   - threshold crossing (`cash_balance < 0`)
   - 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:
   - probability of negative cash by period
   - minimum viable reserve buffer
   - required funding bridge amount and timing

3. Tag scenario archetypes:
   - delay-driven insolvency
   - inflation-driven insolvency
   - FX-driven insolvency

### Phase 3: Decision Layer + Policy Hooks

1. Add policy thresholds configurable by domain/risk appetite.
2. Emit recommendations automatically:
   - resequence payment milestones
   - increase contingency reserve
   - add backup credit facility

3. Integrate with bid/no-bid gate:
   - 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

