How to build a 13-week cash forecast for your small business
A simple weekly view of the cash coming in and going out, so you see the tight weeks while there is still time to do something about them.
Most owners I talk to can tell me last month's revenue to the dollar. Ask them how much cash they will have in six weeks, and the answer is usually a guess. That is not a skill problem. It is a tool problem. A profit and loss statement tells you whether you made money. It does not tell you whether you can make payroll on the 15th.
A 13-week cash forecast does. It is the single most useful report a small business can have, and you can build a good one in an afternoon.
What a 13-week cash forecast is
It is a table with one column for each of the next 13 weeks. For every week you write down three things.
- Cash in, meaning the money you expect to actually land in your bank account that week
- Cash out, meaning everything you will actually pay that week
- Ending cash, which is what is left, and becomes the starting cash for the next week
Thirteen weeks is one quarter. It is long enough to spot trouble early, and short enough that your numbers stay realistic.
Why weekly and not monthly
Because your bills do not arrive monthly. Payroll lands on specific days. A big supplier payment lands on one day. A large customer pays late by two weeks. A monthly view averages all of that out and hides the dip. A weekly view shows it.
How to build it, step by step
Step 1. Start with the cash you have today
Add up the balances in all your business bank accounts. Then subtract any checks or payments you have already sent that have not cleared yet. That is your real starting cash.
Step 2. List the cash coming in
Go through your open invoices and put each one in the week you realistically expect to be paid. This is where most forecasts go wrong. Use how each customer actually pays, not your payment terms. If a customer on 30 day terms always pays in 50 days, put their invoice 50 days out. Then add any other cash you expect, like cash sales or a draw on your credit line.
Step 3. List the cash going out
Put every payment in the week it will actually leave your account.
- Payroll and payroll taxes, on the real pay dates
- Rent and utilities
- Suppliers and inventory
- Loan and credit card payments
- Taxes, insurance, and anything paid quarterly or yearly, which are the ones people forget
Step 4. Calculate your ending cash
For each week, take starting cash, add cash in, and subtract cash out. The result is your ending cash, and it carries over as next week's starting cash. The template does this for you.
Step 5. Set your minimum cash buffer
Decide the lowest balance you are comfortable holding. A good rule of thumb is one payroll plus two weeks of fixed costs. Any week that falls below it is your early warning.
Step 6. Update it every week
Every Monday, replace last week's forecast with what actually happened, see where you were off, and add a new week at the end. It takes about 15 minutes once it is set up, and your forecast gets more accurate every week.
A worked example
Here is part of the forecast for Sample Products Co., a made-up product business with a $60,000 minimum cash buffer. It is the same company you can click through on our homepage.
| Week | Starting cash | Cash in | Cash out | Ending cash |
|---|---|---|---|---|
| Week 5 | $121,000 | $59,000 | $82,000 | $98,000 |
| Week 6 | $98,000 | $25,000 | $51,000 | $72,000 |
| Week 7 | $72,000 | $85,000 | $116,000 | $41,000 |
| Week 8 | $41,000 | $62,000 | $39,000 | $64,000 |
Week 7 drops to $41,000, which is $19,000 below the buffer. The reason is timing. A $62,000 supplier payment and a $39,000 payroll land in the same week, before three overdue customer invoices are expected to come in. The business is not in trouble. It just has a timing problem, and it can see it six weeks ahead.
That is the whole point. With six weeks of warning, the owner can do something about it.
What to do when you see a dip
- Call the customers behind the late invoices this week and get a committed payment date
- Ask the supplier to split the large payment across two weeks
- Hold spending you can delay until the tight week has passed
- Arrange access to your credit line early, even if you never use it
The mistakes I see most often
- Using payment terms instead of real payment habits. Your forecast is only as good as your collection dates.
- Forgetting quarterly and yearly payments. Estimated taxes and insurance renewals cause most surprises.
- Mixing up profit and cash. A sale you made today may not be cash for 60 days.
- Building it once and never updating it. A forecast that is three weeks old is a guess again.
Get the template
Everything in this guide is built into the free template, including the example above.
If you build this and keep it up for a month, you will know your business better than most owners ever do. And if you would rather have someone build it, run it every week, and explain it to you in plain English, that is exactly what I do.
Beata
Want this built and run for you?
Start with the Diagnostic. In one week you get your 13-week cash forecast and the top three places cash is leaking. It starts at $1,000.