Building a 13-week cash flow forecast

Your P&L tells you whether you made money. It doesn't tell you whether you can make payroll on the 15th. A 13-week cash flow forecast does: it maps the cash coming in and going out, week by week, for the next quarter.

Why 13 weeks

Thirteen weeks is one quarter: long enough to see a cash crunch coming while there's still time to act, and short enough that the numbers are mostly known rather than guessed. You know who owes you, what bills are due, and when payroll and remittances land.

Building it

Use a spreadsheet with one column per week and these rows:

1. 01Opening cash. What's in the bank at the start of the week. Week 1 is today's actual balance.
2. 02Cash in. Customer payments, by the week you realistically expect them, not the invoice due date. Use each customer's actual payment habits.
3. 03Cash out. Payroll, source deduction remittances, rent, loan payments, supplier bills, GST and PST payments, insurance, and known one-offs, in the week they leave the account.
4. 04Net cash flow. Cash in minus cash out.
5. 05Closing cash. Opening cash plus net cash flow. It becomes next week's opening cash.

Add a minimum cash line: the balance you never want to drop below, such as one payroll plus one month's rent. Any week that dips under it is your early warning.

A worked example

Four weeks of a small trades business heading into a slow month (figures illustrative):

Seeing week 4 now leaves options: chase the two slowest receivables, move a supplier payment, delay an equipment purchase, or arrange a line of credit before you need it. Finding out in week 4 leaves none of them.

Keeping it rolling

• 01Every week, replace last week's forecast with actuals, add a new week 13 at the end, and adjust anything that changed.
• 02Compare forecast to actual. If customers keep paying later than you assumed, change the assumption. The forecast gets more accurate every week you do this.
• 03Keep the books current. The forecast is only as good as your receivables and payables lists, which is one reason monthly bookkeeping matters.

Common mistakes

• 01Forecasting revenue instead of cash. A sale invoiced today and paid in 45 days belongs in week 7, not week 1.
• 02Forgetting the irregular bills. GST returns, insurance renewals, annual software, and tax instalments don't come every month, which is exactly why they cause surprises.
• 03Counting the GST you collect as yours. It goes out again at the next GST return. Forecast that payment.
• 04Building it once. A forecast that isn't updated stops being useful within a few weeks.