The Georgetown distributor in our Working Capital Explainer has a profitable hotel order, but must pay for stock and delivery before the customer settles its invoice. It needs an answer more precise than “the money should arrive next month.” On which Friday might the bank balance become too low to pay staff or suppliers?
A 13-week cash-flow forecast answers that question by placing expected receipts and payments in the weeks when cash is likely to move. Thirteen weeks is a practical planning horizon, not a statutory requirement; BDC provides a rolling 13-week cash-flow planner as one example of the method. Its value is that it makes a shortage visible early enough for a business to act. The forecast is a management tool, not a prediction that every customer will pay on the exact day entered.
Start with money that is actually available
Record the opening balance from the business bank account at a stated date. Reconcile it for deposits or payments already in transit so the number is not accidentally overstated. Keep an approved credit facility in a separate line: borrowing capacity is not the same thing as cash already in the account, and the facility may have conditions or limits.
Use one row for each of the next 13 weeks. For every week, the basic calculation is straightforward: opening cash plus expected receipts minus expected payments equals forecast closing cash. The closing balance becomes the following week’s opening balance. If the business has several bank accounts or currencies, decide whether to forecast each separately and then prepare a consolidated view; do not add balances that cannot readily be transferred or converted.
Put receipts in the week cash is expected
Begin with invoices already issued. For each customer, record the amount, contractual due date and the date collection is realistically expected. An invoice that is 20 days overdue should not be treated as certain cash next week merely because the original term was “net 30.” Check whether the customer has accepted delivery, received the correct documents or raised a dispute.
Then add deposits, progress payments and new sales only where there is a reasonable basis for the expected timing. Separate confirmed receipts from estimates. A signed order, a verbal promise and a possible new customer should not appear as if they carry the same certainty. If a large receipt is uncertain, show a second forecast without it. This prevents a single optimistic entry from hiding a genuine cash problem.
Place payments when they must leave the bank
List supplier invoices by due date, along with payroll, rent, utilities, transport, loan instalments, insurance, customs charges, tax payments and planned equipment or project spending. Include one-off commitments that a simple monthly budget can miss. Distinguish payments already contractually due from discretionary purchases that management could defer without breaching an obligation.
Do not move a payment into a later week just to make the forecast look better. If you intend to seek new supplier terms, leave the original due date in the base case and show the negotiated alternative separately until it is agreed. Likewise, do not treat an unapproved loan or a pending customer advance as available cash.
Read the low point, not only the final balance
The following miniature forecast is illustrative. It shows only the first three weeks of a 13-week model, in Guyana dollars, before any remedial action or borrowing. The remaining ten weeks would be filled in using the same rows and rules.
| G$ | Week 1 | Week 2 | Week 3 |
|---|---|---|---|
| Opening forecast cash | 1,000,000 | 200,000 | (100,000) |
| Customer receipts | 400,000 | 600,000 | 2,000,000 |
| Supplier payments | (700,000) | (400,000) | (500,000) |
| Payroll | (300,000) | (300,000) | (300,000) |
| Other committed payments | (200,000) | (200,000) | (200,000) |
| Closing forecast cash | 200,000 | (100,000) | 900,000 |
The G$2 million expected in Week 3 does not erase the Week 2 problem. Without an agreed source of funds or a lawful change to payment timing, the business cannot simply operate with negative cash. Management needs to resolve at least a G$100,000 gap before Week 2, and prudence may require a larger buffer because receipts and costs can move. A positive Friday balance can also hide a Wednesday payroll shortfall: when cash is tight, check the dates within the week as well as the weekly closing figure. This is the decision the forecast is designed to expose.
The response might be to collect a genuinely due invoice earlier, agree a customer deposit, negotiate a supplier payment date, defer non-essential spending or arrange suitable short-term finance. Each option has a cost or commercial consequence. Record the action, owner and confirmation date beside the affected forecast line; do not silently overwrite the original assumption.
Test what happens if the week goes badly
Once the base case balances, test the events most likely to change it. What if the hotel pays two weeks late? What if imported stock costs more after a currency movement? What if a shipment is delayed and sales shift into the following month? A useful downside case identifies the lowest cash balance under those conditions and the latest date by which management must decide what to do.
This exercise also prevents a false sense of precision. A forecast may be detailed to the dollar, but its value depends on the quality of the dates and assumptions entered. Annotate uncertain lines. A business with irregular receipts may need a larger cash buffer than one with dependable weekly collections.
Update it every week
At the end of each week, replace the forecast for that week with the cash that actually arrived and left. Explain material differences: was a customer late, was an invoice larger than expected, or did a payment move for a sound reason? Shift the remaining weeks forward and add a new thirteenth week. Assign one person responsibility for maintaining the model and arrange a regular review with whoever can authorise spending or customer follow-up.
The International Finance Corporation’s guidance for growing small and medium-sized enterprises recommends making cash-flow forecasts part of planning discussions so financing needs and investment decisions are visible. The UK government’s cash-flow guidance similarly warns that even an effectively trading company can encounter cash difficulty as it grows. Those are general management principles; the figures and decisions in a Guyana business must come from its own records and obligations.
For the distributor, the forecast does not win the hotel order or collect the invoice. It does something equally useful: it identifies the week in which the order could become impossible to deliver without action. A 13-week forecast is working well when the business can see that week coming, test its options and make a decision before the bank balance forces one.
