How to build a 13-week cash flow forecast

Why 13 weeks, and not a monthly budget?

Thirteen weeks is one quarter, long enough to see the next VAT payment, three payrolls and the big supplier bills, and short enough to forecast with real invoices rather than guesses. Weekly columns matter because cash problems rarely last a month: they are a bad Tuesday between salaries going out and a large customer paying.

A monthly budget answers a different question, whether the year will be profitable. A business can be profitable on paper and still miss payroll because its customers pay sixty days after delivery while staff and suppliers are paid sooner. The cash forecast is the tool for that gap.

What goes in each column of the forecast?

Each week is a column with four lines: the cash you start the week with, the money you expect to receive, the money you expect to pay, and the closing cash, which becomes next week's opening cash. Under receipts and payments, list the main sources separately so that each figure can be checked against a document.

Which payment dates should you put in first?

Start with the payments whose dates you cannot move. Salaries for monthly-paid staff are paid once a month. GOSI contributions for a month are due within the first 15 days of the following month. The VAT return and its payment are due by the last day of the month after the tax period. Rent and loan instalments follow their contracts.

• Salaries: the Labour Law requires monthly-paid workers to be paid once a month, through a bank account.
• GOSI: the month's contributions, due within the first 15 days of the next month.
• VAT: quarterly for most small businesses, due by the last day of the month after the quarter.
• Final settlements: when an employee leaves, wages and dues are settled within a week, or two weeks if the employee ended the contract.
• Rent, loans and insurance: on the dates in each contract.

Put the VAT payment in the forecast as the output VAT you have charged minus the input VAT you can deduct for the period. That figure builds up every week, so it should not come as a surprise.

How do you forecast what customers will pay?

Use the list of unpaid sales invoices, then adjust each one by how that customer really pays. If a customer with 30-day terms usually pays after 45 days, put the receipt in the week 45 days after the invoice. Add expected cash sales from recent weeks, and leave out any receipt you would not bet on.

Keep large customers on their own line. One late payment from a big account can turn a comfortable week into a tight one, and seeing it on its own line tells you who to call. For new orders not yet invoiced, add them only when the delivery date is firm.

How do you build the forecast, step by step?

Build it once carefully and then keep it alive with a short weekly update. The first version takes an afternoon: set up thirteen weekly columns, enter the fixed payments, add supplier bills and customer receipts from your books, and check the closing cash of every week against the lowest balance you are comfortable holding.

1. Set up thirteen weekly columns starting this Sunday, with opening cash, receipts, payments and closing cash.
2. Enter the opening cash from your reconciled bank and cash balances.
3. Add the fixed payments: salaries, GOSI, VAT, rent, loan instalments and insurance, each in its week.
4. Add supplier bills by their due dates, and the regular costs you pay without a bill.
5. Add customer receipts from unpaid invoices, moved to the week each customer usually pays.
6. Add expected cash sales and any other income you are confident about.
7. Work out the closing cash of every week and mark the weeks below your minimum balance.
8. Each week, replace the past week with actual figures and add a new week at the end.

What should you do when a week turns negative?

A negative week in the forecast is a warning, not a crisis, as long as you see it several weeks ahead. Act on both sides: bring receipts forward by chasing overdue invoices and invoicing finished work at once, and move payments that can move by agreeing new dates with suppliers before the bill is late.

• Chase the overdue invoices behind the tight week first, largest amount first.
• Invoice delivered goods and finished work the same day, not at month end.
• Agree a later date with a supplier before the due date, not after it.
• Hold back purchases that can wait, and buy stock closer to when it sells.
• Never delay salaries, GOSI or VAT to fix a cash gap: those dates carry legal consequences.

How do you know if the forecast is any good?

Compare each week's forecast with what really happened, line by line. Large differences show you where the forecast is weak: customers who pay later than you assumed, costs you forgot, or purchases bought earlier than planned. After a few weeks the forecast for the next two or three weeks should be close to the actual figures.

How DynamoOS helps

In Dynamo Finance, unpaid customer invoices are listed by how late they are, supplier bills are checked against what you ordered and received, and your bank accounts are reconciled against the statement. Dynamo Sales turns orders into invoices without retyping. Your forecast starts from figures that are already in the books.