How to build a 13-week cash flow forecast

Profitable businesses still run out of cash. Customers pay late, a large tax payment falls in the same week as payroll, or a big order needs stock paid for well before the customer pays. The profit and loss will not warn you about any of this, because it measures performance, not timing. A 13-week cash flow forecast does. It shows, week by week, how much cash you expect to have over the next quarter, so you can see a shortfall coming and deal with it while you still have options.

Why 13 weeks?

Thirteen weeks is one quarter. It is long enough to capture the big recurring payments that cause most cash squeezes, such as a BAS, quarterly obligations, insurance renewals and rent reviews, and short enough that you can forecast it with reasonable confidence from information you already have. Weekly detail matters because many cash problems are about a single bad week, which a monthly forecast can average away.

The forecast is also rolling. Each week you drop the week that has passed, compare what actually happened with what you forecast, and add a new week at the end. You always have a quarter in view.

What you need before you start

your current bank balances across all business accounts
an aged receivables report showing who owes you what and when it is due
an aged payables report showing what you owe and when it is due
your payroll calendar, including super and PAYG withholding
loan, lease and hire purchase repayment schedules
a list of known one-off items: tax payments, equipment purchases, owner drawings, annual subscriptions

Your accounting software should produce most of this. If the receivables and payables reports are not reliable, start with a month-end close to tidy them up.

Building the forecast, step by step

1. Set up the structure

Use a spreadsheet with one column per week for 13 weeks, each headed by the week-ending date. Down the side, set out three sections:

opening cash
cash in (receipts)
cash out (payments)

Closing cash for each week is opening cash plus receipts minus payments. That closing figure becomes the next week's opening cash.

2. Start with actual cash

Week one's opening balance is the total of your business bank accounts today. Use the bank balance, not the figure in your accounting software if it is not reconciled. Leave out any overdraft limit or undrawn facility. You want to see your own cash, and treat available finance as a separate safety net.

3. Forecast receipts

This is where most forecasts go wrong, because it is tempting to assume customers pay on time. Instead:

take each significant debtor from your receivables report and place the expected receipt in the week you realistically expect it, based on how that customer actually pays
add forecast receipts from new sales, using your normal pattern of when sales turn into cash
include other receipts such as GST refunds, asset sales or capital you know is coming

If a customer usually pays 45 days after invoice despite 30-day terms, forecast 45 days.

4. Forecast payments

List payments by category, placing each in the week it will leave your account:

wages and salaries, in the weeks they are paid
PAYG withholding and superannuation, on the dates you pay them
suppliers, based on your payables report and your normal payment terms
rent, utilities, insurance and subscriptions
loan and lease repayments
GST, PAYG instalments and any other tax payments
owner drawings or director payments
planned one-off spending

Separating categories makes it easier to see which lever you could pull if a week looks tight.

5. Look at the closing balances

Once both sides are in, look along the closing cash row. You are looking for:

any week where cash goes negative or falls below the minimum buffer you are comfortable holding
a downward trend across the quarter, even if no single week is negative
weeks where a lot of money goes out at once

A simple example

As an illustration only, imagine a business that starts the quarter with $40,000 in the bank. It typically receives about $30,000 a week from customers and pays about $28,000 a week in wages, suppliers and overheads. On those figures cash creeps up slowly. But in week five it pays its quarterly BAS of $18,000, and in week six a large customer who owes $25,000 is expected to pay three weeks late. The forecast shows cash dropping to around $9,000 in week six, well below the $15,000 buffer the owner wants to keep.

Seeing that eight weeks out changes the conversation. The owner can chase the late customer early, ask a supplier for slightly longer terms, delay a planned equipment purchase, or talk to the bank about a short-term facility before it is urgent rather than after.

Keeping it useful

Update it weekly

Set a fixed time each week. Enter the actual opening balance, review last week's forecast against what really happened, roll the forecast forward by one week and adjust anything that has changed. It should take well under an hour once set up.

Track forecast accuracy

Compare forecast with actual each week, especially for receipts. If you consistently overestimate how quickly customers pay, adjust your assumptions. A forecast that is always optimistic is worse than none, because it gives false comfort.

Keep a scenario or two

For important decisions, copy the forecast and test a downside case: what if the largest customer pays a month late, or sales drop by a fifth? Knowing how much headroom you have under pressure is often more useful than the central forecast itself.

Link it to the bigger picture

A 13-week forecast is a short-range tool. It sits alongside your budget and management accounts, not in place of them. If the forecast keeps showing the same squeeze, the cause is usually structural: margins, pricing, payment terms or how the business is funded. That is a question for a broader review.

Common mistakes

Forecasting from profit, not cash. Sales are not receipts and expenses are not payments until money moves.
Forgetting GST. Receipts and supplier payments include GST, and the net amount is paid to the ATO later. Forecast the full amounts and the BAS payment separately. Our article on GST in Australia explains how it works.
Leaving out the owner. Drawings and director payments are real cash out.
Building it once and abandoning it. The value is in the weekly habit.

A 13-week cash flow forecast does not change how much cash you have. It changes how early you know, and that gives you choices.

How we can help

If you would like help setting up a cash flow forecast for your business, or reviewing what it is telling you, we can work through it with you. Find out more about our investment and financial advisory services or contact us to arrange a conversation.

This article is general information only and does not take into account your circumstances. Speak to a qualified adviser before acting on it.