How to build a cash flow model for local government

How to develop your local government cash flow model

We understand that cash flow management continues to be a source of trepidation for many communities, given the volatility in revenue streams resulting from delayed or decreased tax receipts and unplanned expenditures. We also know government entities cannot simply close up shop when cash dries up.

While figuring out how to create a cash flow model might seem overwhelming, we have designed an easy-to-follow three-step process to help you navigate your cash flow analysis during the COVID-19 pandemic and for years to come. Your model might be created in Microsoft Excel or a business intelligence tool such as Microsoft Power BI™ or Tableau®, to name just a few options. Whatever tool you choose, these three steps will help streamline your local government budgeting.

What is a cash flow model?

A cash flow model is a detailed look at an organization’s income, expenditures, assets, and liabilities, which are projected forward year by year through extrapolating inflows and outflows.

The benefits of a cash flow model

A government cash flow model should be a priority for your organization because it provides several benefits. Cash flow modeling:

  • Presents an array of financial scenarios and outcomes
  • Allows you to make better, more informed decisions for your organization
  • Shows how minor changes can dramatically impact your local government’s financial future
  • Can avoid your organization from running out of money
  • May help minimize liabilities
  • Offers a well-rounded picture of your local government’s financial health

How to build a cash flow model for your community with the Crowe three-step process

1. Determine cash 

Start by determining current cash on hand, including reserves. Keep in mind rules regarding use of individual funds, and flag any funds that might be used only for specific purposes. Be sure to review your community’s cash management and fund balance policies, too, and build these requirements into the model as appropriate.

2. Model inflows 

Next, determine your cash inflows and expected timing (for example, by month), including tax receipts, revenues from charges and fees, intergovernmental transfers, and proceeds from planned debt issuances. For more information on how to build a model for your revenues specifically, refer to this article.

3. Model outflows 

Finally, determine your cash outflows and expected timing (for example, by month), including cost of operations, interest on debt, capital outlays, assistance and subsidies to other entities, insurance benefits and repayments, and other expenditures to your community. For more information on how to build a model for your expenditures specifically, refer to this article.

Take your cash flow model to the next level with the Crowe Financial Scenario Planner

Once you have these three pieces in the model, you can create visualizations and charts to determine where you might have a deficit in your cash balance. You then can go back and analyze revenue streams and expenditures to determine where you might be able to increase revenues and cut or delay expenditures to create a positive cash flow situation for your community.

To help with this, we built the Crowe Financial Scenario Planner. This innovative tool features a preconfigured dashboard and modeling capabilities to quickly and easily import and analyze your data. We take the guesswork out of building a government cash flow model, so you can focus on what really matters — serving your local community. 

Microsoft Excel and Power BI are either registered trademarks or trademarks of Microsoft Corp. in the United States and/or other countries. 
Tableau is a registered trademark of Tableau Software in the United States and/or other countries.

Contact us

We are here to help. Reach out to us and let’s have a conversation about your community’s unique cash flow modeling needs and how the Crowe Financial Scenario Planner for Local Government might help.
Alicia L. Antonetti-Tricker
Alicia L. Antonetti-Tricker
Principal, Talent Solutions and Office Managing Principal, Indianapolis
Tim Berry
Tim Berry
Managing Director, Consulting