Why thirteen weeks
A quarter. Long enough to cover a VAT quarter, a payroll cycle or two, the big supplier payments and the slow customers. Short enough that the figures are based on real invoices and real commitments rather than guesses.
What goes in
- Opening bank balance, actual, from the statement
- Receipts by week: invoiced sales by expected payment date, not invoice date; contracted work; anything else certain
- Payments by week: payroll, PAYE, VAT, rent, loan repayments, supplier payments by due date, and the irregular items everyone forgets
- Closing balance each week, carried forward
- A headroom line: closing balance less any minimum you need to keep
Keeping it honest
The forecast is only useful if receipts are dated when customers actually pay, not when you hope they will. Use each customer's real payment history. Add every known payment, including the quarterly ones. Update it every week with actuals and roll it forward a week. The first version takes a day. Each weekly update takes an hour.
If the forecast shows a dip below zero in week eight, you have eight weeks to fix it. That is the whole point.
What to do with a gap
In rough order: invoice faster and chase harder, ask for deposits or stage payments on new work, re-phase supplier payments by agreement, agree a time to pay arrangement with HMRC before the due date, and only then look at funding. Funding is the last resort because it costs money and solves nothing about why the gap exists.
When to get help
If HMRC or key suppliers are already being paid late, or the gap is more than a few weeks of costs, get an independent view quickly. Early restructuring work is cheap and usually successful. Late restructuring work is expensive and often is not.
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Everything in this guide is work we do for clients every month. A thirty-minute conversation will tell you whether it makes sense for your business.
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