13-week cash flow forecast

What it means

A 13-week cash flow forecast is a table in which each of the next 13 weeks has its own column of expected receipts, payments and bank balance. Unlike an annual budget it works not with costs and revenue but with actual payments, meaning when money really comes in and goes out.

Thirteen weeks is roughly one quarter. That is short enough to forecast fairly accurately from open invoices, orders and the payroll calendar, and long enough for the company to react, for example by negotiating an overdraft, postponing an investment or speeding up collections.

Each week the forecast rolls forward by one week and is compared with actuals. That comparison is what makes it a management tool: it shows which customers pay later than expected and where the view of liquidity is consistently too optimistic.

How it works in practice

We build the forecast from data the accounts already hold: the customer and supplier sub-ledgers by due date, wages and contributions with their fixed dates, VAT and tax advances from the tax calendar, and loan and lease instalments. We add an estimate of new sales not yet invoiced.

Banks ask for it mainly when a company has breached its covenants or requests a payment holiday, and in preventive restructuring it is essentially a mandatory attachment. It answers the creditors’ question of whether the company will survive the coming months without new money.

For smaller companies we recommend a simple spreadsheet version updated once a week on the same day. Discipline matters more than a perfect model: every week enter the actual balances, review the variances and decide which payments need to move.

What to watch out for

The most common mistake is building the forecast from invoice due dates rather than from when customers actually pay. If the average customer pays 20 days late, the forecast is three weeks more optimistic than reality, and that is often exactly the gap that leaves a company short on payday.

The second is forgetting irregular payments: quarterly tax advances, annual insurance premiums, holiday periods with weaker collections or the tax balance due after filing a return. These must be in the calendar in advance, or the forecast fails in precisely the week it is needed most.