A business can be profitable and still run out of cash flow, because profit is a measure of a period and cash is a measure of a moment. What kills small businesses is the gap between the two.
A forecast you will actually keep
Thirteen weeks, one column per week, four rows. That is enough.
| Row | What goes in it |
|---|---|
| Opening balance | What is in the bank on Monday |
| Money in | Invoices you genuinely expect to be paid that week, not all invoices outstanding |
| Money out | Wages, rent, suppliers, VAT, provisional tax, debit orders |
| Closing balance | Opening plus in, minus out. Carries to next week |
The discipline is in the second row. Put in what you expect, not what you are owed. A client who has paid on day 45 for two years will pay on day 45 again, whatever your terms say.
The four cash flow levers
- Get paid sooner. Shorter terms, deposits, invoicing the day work completes rather than at month end.
- Pay later. Supplier terms are negotiable more often than people assume.
- Reduce what is stuck. Stock and work in progress are cash you cannot spend.
- Hold a buffer. Enough to cover the largest single month of fixed costs.
The first lever is the one most within your control, and invoicing promptly is the cheapest version of it. An invoice sent on the day the job finishes gets paid a full billing cycle earlier than one sent at month end.
The two payments that catch people
VAT and provisional tax. Both are large, both are predictable, and both are routinely spent before they fall due because they sat in the business account looking like available money.
Move them out weekly into a separate account. It is a small habit that removes the most common cause of a scramble.
Warning signs
- Paying suppliers later each month without having agreed it
- Using a deposit on one job to fund materials on another
- Not knowing this morning's bank balance without checking
- Debtor days rising quietly quarter on quarter
Common questions
How often should I update the forecast?
Weekly, and it should take fifteen minutes. A forecast updated monthly is a report, not a tool.
What buffer should I hold?
Enough to cover your largest month of fixed costs is a common starting point. More if your income is lumpy.
Is a spreadsheet enough?
For thirteen weeks, yes. This is one job a spreadsheet does better than most software.
Knowing what is outstanding, and how old it is, is where a cash flow forecast starts.
Start invoicingDisclaimer: This content is for general information only and does not constitute legal, tax, accounting or financial advice. Always confirm important requirements with SARS, the relevant authority or a qualified professional.
