Cash Flow Forecasting: How to Build a Simple 13-Week Forecast
A cash flow forecast is a week-by-week or month-by-month estimate of the money that will come into and go out of your bank account. It shows your expected balance at each point, so you can see a cash shortfall weeks before it happens rather than on the day a payment bounces.
You don't need accounting software or a finance background to build one. A spreadsheet, your bank balance and an honest list of what's due is enough to start.
What is a cash flow forecast?
A cash flow forecast only cares about when cash moves. It ignores when a sale is made or an expense is incurred, and records when the customer actually pays and when the bill is actually settled. That makes it different from a profit forecast or a budget.
This difference is the whole point. A business can be comfortably profitable and still hit a week where outgoing payments exceed the balance. That is especially likely when revenue is growing. The forecast is the tool that makes that week visible in advance.
Why use a 13-week forecast?
Thirteen weeks is one quarter. It is long enough to see around the next few payroll cycles, rent payments and tax dates, and short enough that the numbers are grounded in invoices you've already sent and bills you already know about.
Weekly columns matter because monthly totals can hide a crisis. A month can end with a positive balance while dipping below zero in its second week, when payroll lands before the largest customer pays.
How do you build a cash flow forecast?
- Start with today's real bank balance. Use the actual figure, not the one in your accounting software if it's behind.
- List expected receipts by week. Start with unpaid invoices and put each in the week you realistically expect payment, based on how that customer actually pays, not the due date. Your accounts receivable aging is the source. Then add expected new sales, conservatively.
- List committed payments by week. Payroll, rent, loan repayments, supplier invoices, subscriptions, insurance, and tax payments including sales tax, VAT or GST you've collected. Approved purchase orders are a good source of committed spending.
- Calculate each week's closing balance. Opening balance plus receipts minus payments. That closing balance becomes the next week's opening balance.
- Mark a minimum balance. Pick a buffer you don't want to fall below and highlight any week under it.
What does a simple forecast look like?
Here are the first six weeks of a forecast for a small services business with a $20,000 opening balance and a $10,000 minimum buffer. Payroll is paid fortnightly; rent and a tax payment fall in week 4.
| Week | Opening | Cash in | Cash out | Closing |
|---|---|---|---|---|
| 1 | $20,000 | $12,000 | $9,500 | $22,500 |
| 2 | $22,500 | $8,000 | $14,000 | $16,500 |
| 3 | $16,500 | $15,000 | $9,000 | $22,500 |
| 4 | $22,500 | $6,000 | $21,000 | $7,500 |
| 5 | $7,500 | $11,000 | $9,000 | $9,500 |
| 6 | $9,500 | $9,000 | $15,000 | $3,500 |
How do you read and act on a cash flow forecast?
The business above is never overdrawn, but it drops below its buffer in week 4 and keeps falling to $3,500 in week 6. With six weeks' notice, the owner has real options:
- Chase the largest customer due in weeks 2–3 so payment lands before week 4.
- Ask for a deposit on a new project starting in week 5.
- Move a discretionary purchase from week 6 to week 8.
- Talk to the bank about a short-term facility before it is urgent.
The same shortfall discovered on the Friday of week 6 leaves almost none of these open. That is the difference a forecast makes.
How does a forecast help with bigger decisions?
Beyond spotting shortfalls, the forecast is the quickest way to test a decision before you make it. Add the change to a copy of the forecast and see what happens to the lowest balance:
- Hiring. A new salary starts immediately; the revenue it supports may take months. When is the low point, and is it above your buffer?
- A large order. Add the materials and labour when you'd pay for them, and the receipt when the customer would realistically pay.
- Equipment or a vehicle. Compare paying outright with a loan: the loan's monthly payments sit very differently in the forecast.
- Changing payment terms. Move receipts earlier or later to see how much cash a change of terms would free or absorb.
Should you build more than one scenario?
A single forecast shows what you expect. A second, cautious version shows what happens if things go worse, and that is often the more useful one. A simple downside case might assume:
- Your two slowest-paying customers pay two weeks later than usual.
- New sales come in 20% below your base estimate.
- One unexpected cost, such as a repair or a tax adjustment, lands mid-quarter.
If the downside case never falls below your buffer, you have room to invest. If it dips below zero, you know which actions to prepare now, while they're still optional.
How do you forecast with irregular income?
Freelancers, consultants and project-based businesses often can't predict next month's sales with any confidence. The forecast still works if you separate what's known from what's hoped for:
- Known receipts: invoices already sent and signed work with agreed payment dates.
- Likely receipts: work that is verbally agreed or very probable. Consider including it at a reduced amount.
- Possible receipts: proposals and leads. Leave these out of the main forecast.
Planning committed costs against known receipts only is conservative, but it's the version that won't surprise you. Asking for deposits or milestone payments turns more of your income into the known category.
What are the most common forecasting mistakes?
| Mistake | Why it misleads | Better approach |
|---|---|---|
| Using invoice due dates for receipts | Customers often pay later than terms | Use each customer's actual payment history |
| Forgetting tax payments | Tax bills can be the largest single outflow | Add every tax due date for the period |
| Treating profit as cash | Credit sales and stock purchases change timing | Record only money moving in or out of the bank |
| Being optimistic about new sales | Hoped-for revenue fills the gap on paper only | Include only likely sales, and test a downside case |
| Building it once and never updating | Assumptions drift from reality within weeks | Roll it forward every week |
How do you keep a forecast up to date?
Once a week, replace last week's forecast with actual figures, add a new week at the end so there are always 13 ahead, and adjust any assumptions that turned out wrong. It usually takes less time than the first build.
Over time, comparing forecast to actual becomes the most valuable part: you learn which customers pay late, which costs you underestimate, and how much buffer your business really needs. Making this part of a regular finance routine is what keeps it useful.