Distributable cash is the amount the company can support for an owner distribution after allowing for its obligations, planned cash needs, restrictions and required reserve. It is a dated cash-planning judgment, not another name for profit or the bank balance.

Test a payment against the whole cash plan

Use the current model forecast to test distribution capacity. Start with opening unrestricted cash, add operating cash flow and other supported receipts, then deduct cash uses not already included. That gives closing cash before the proposed distribution. Subtract the proposal and compare what remains with the required reserve, in every relevant month.

Cash uses can include equipment purchases, debt principal, taxes not already included and other committed payments. Debt service means principal and interest; check whether interest is already in operating cash flow before deducting it. Do the same for company taxes and working-capital changes. An owner’s tax distribution needs separate identification from company income tax expense.

A cash reserve is the balance you need to retain. It is not another expense to deduct every period. Restricted cash is money whose use is limited; it is not available merely because it appears in an account.

A proposed amount is not an approved payment

In a hypothetical quarter, opening unrestricted cash of $100,000 plus $140,000 operating cash flow, less $40,000 equipment spending and $20,000 loan principal, leaves $180,000 before distributions. A proposed $50,000 payment leaves $130,000. Against a $120,000 reserve, that leaves $10,000 of headroom at quarter end.

That calculation is only a starting test. It assumes no other receipts or payments. An earlier payroll shortfall, later committed payment or financing restriction can still prevent the $50,000 distribution. Do not add four quarter-end headroom balances together as though each were new cash.

Keep company capacity separate from personal goals

The Owner’s Scorecard says what you want to receive. The supported company forecast shows what can fund it. Compensation and distributions remain separate sources; an increase in company value does not fund household spending until cash is realized.

Record the proposed amount, assumptions and decision in the current monthly or quarterly ownership review. Keep the approved timing in the cash forecast and record actual payments when they happen. An earnings add-back in Normalized EBITDA does not create distributable cash.

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