Insights Cash 6 min read
The 13-week cash forecast, and why the bank asks for it
A monthly budget tells you whether you are profitable. A 13-week forecast tells you whether you can make payroll. How to build one in an afternoon and keep it honest.
By the Sightline partners ·
Profitable companies run out of cash more often than loss-making ones. Growth ties money up in stock and receivables long before it shows up as profit, and a monthly profit-and-loss budget will not warn you.
A 13-week cash forecast will. It is a week-by-week view of money in and money out, rolled forward every Monday. Lenders ask for it because it is the one report that shows whether management knows where the cash is going.
How to build one
Start with this week’s bank balance. Then, for each of the next thirteen weeks, list:
- Receipts — from your aged debtors list, by customer, on the date each customer actually pays, not the due date.
- Payroll — by pay date, including taxes and benefits.
- Suppliers — from your aged creditors and open purchase orders.
- Fixed payments — rent, loan repayments, leases, insurance.
- Tax — sales tax, payroll tax and estimated income tax, on their real dates.
The closing balance each week is next week’s opening balance. That is the whole model.
How to keep it honest
The forecast is only as good as last week’s accuracy. Every Monday, compare what you forecast for the week just gone to what happened, and write down the three largest differences. After a month, the pattern tells you which customers pay late and which costs you forget.
What to do with it
Look at the lowest point in the thirteen weeks, not the end. If the lowest point is below your comfort level, you have weeks, not days, to act: chase a customer, move a supplier payment, or talk to the bank while you still have options.
Our fractional CFO clients get this forecast set up in the first month and updated every Monday. See what the retainer includes.