Forecasting Cash Flow

Profit tells you whether the business model works. Cash tells you whether you will still be around to enjoy it. Plenty of profitable small businesses have hit a wall simply because money arrived later than the bills that funded it — and by the time the bank balance said so, the options had narrowed to expensive ones. A short cash flow forecast exists to move that moment forward: to show you the tight week while it is still weeks away.

Why 13 weeks

The most useful small business forecast is a rolling 13-week one — a quarter, laid out week by week. It is long enough to contain a full BAS and super cycle, and short enough that the entries are real: actual invoices, actual bills, actual pay runs, rather than annual guesses divided by 52. A spreadsheet with one column per week is enough. The software supplies the raw material; the judgement is yours.

Certain out, probable in

The forecast has two halves, and they deserve opposite treatment. Outflows are mostly certain. Wages, rent, loan repayments, supplier bills already received, super and the next BAS are commitments — enter them in the week they fall due, at full value, whether or not it is comfortable to look at. Inflows are only probable. An issued invoice is not cash, and a due date is not a payment date. Enter each expected receipt in the week that customer genuinely tends to pay, based on their actual habits, and be deliberately pessimistic about new or historically slow payers. Treating outgoings as fixed and income as hopeful is the discipline that keeps the forecast honest.

Mark the compliance weeks

The weeks that hurt are predictable. BAS payments, super contributions and the wage cycle land on known dates — quarterly obligations tend to cluster around the 28th of the month after the quarter ends, though the exact dates depend on your lodgement cycle and the rules current at the time, so check the current ATO dates and mark them in the forecast well in advance. A quarter can look comfortable on average and still contain one savage week where the BAS, a super deadline and a fortnightly pay run coincide. Finding that week early is most of what the forecast is for.

Roll it forward every week

A forecast is not a document; it is a habit. Once a week, replace the week that just passed with what actually happened, add a fresh week at the far end, and adjust anything you have learned — the customer who promised Friday, the quote that was accepted, the repair that cannot wait. The update takes minutes once the structure exists, and the payoff compounds: you start to see who really pays when, which weeks recur as tight, and how much buffer the business genuinely needs before you can pay yourself with confidence.

What we commonly see go wrong

• Forecasting invoices in the week they are issued rather than the week the customer actually tends to pay.
• Leaving BAS, super and income tax out entirely, so the forecast runs permanently sunnier than the bank account.
• Building the forecast once during a scare and abandoning it the moment the scare passes.
• Ignoring the big annual bills — insurance, registrations, subscriptions billed yearly — because they are not this quarter's problem, until they are.

A worked example

As an illustration: a small building contractor runs a 13-week forecast and sees that in one mid-quarter week a BAS payment, the quarterly super contribution and a fortnightly pay run land within days of each other, while the only large inflow expected that week is from a developer who habitually pays late. Seen six weeks out, the fixes are ordinary — a deposit invoiced on the next job, an early and friendly call to the developer, a planned tool purchase pushed back a month. Seen in the same week, the only fix left is the overdraft, on the bank's terms.

When to get help

If the forecast keeps surprising you in the same direction, or the tight weeks are arriving closer together rather than further apart, that is a message about pricing, payment terms or debt structure — not just timing. A bookkeeper or accountant can build the first 13-week template from your file so the habit starts from something real, and reviewing it folds naturally into a quarterly business review rhythm.

What is the difference between a cash flow forecast and a budget?

A budget is the year's plan for profit; a forecast is the next few months' expectation of cash timing. A business can be exactly on budget and still hit a week it cannot pay — the forecast is what catches that week early.

Can Xero or MYOB produce the forecast for me?

They supply the raw material — invoices owed, bills due and short-term projections — and add-on tools go further. But the judgement about when customers will really pay is yours, which is why a simple spreadsheet you actually update every week often beats an automated view you never question.

How far ahead should a small business forecast?

A rolling 13-week horizon suits most small businesses: long enough to include a BAS and super cycle, short enough to stay accurate. Businesses with long project cycles sometimes add a rougher 12-month view on top, but the weekly one does the protecting.