Cash flow forecast: see weeks ahead whether the money will be there
Looking ahead at your cash balance by month and by week, with a worked 13-week forecast and the signs that cash is getting tight.
In this topic: Planning and control 9
Know the lowest point of the year before you reach it
A cash flow forecast shows how much money will come in and go out over the coming weeks and months, and where your balance will be at its lowest. This page explains how to build one for an established business, by month and by week, with a worked 13-week forecast and the signs that cash is getting tight.
A renovation contractor has a healthy order book and a profitable year behind him. Even so, by March he is overdrawn. Two large projects started in January, the materials have been paid for and so have the staff, but the first stage invoices only go out once the structural work is finished. One client pays after sixty days instead of thirty. The year closed with a profit; what the bank mainly sees is an overdraft over its limit.
Profit and cash are out of step in every business. Customers pay later than you deliver, suppliers want their money before you have sold anything, and VAT, holiday pay and loan repayments fall due on fixed dates. A cash flow forecast makes those timing differences visible before they become a problem.
Cash flow forecast, cash flow budget and cash flow statement
The three terms are often used interchangeably. Each looks at the same money from a different angle.
| Term | Looks | When it is used |
|---|---|---|
| Cash flow budget | Ahead, as a plan | At startup, in the business plan and in the annual budget |
| Cash flow forecast | Ahead, as the current expectation | Continuously during the year, updated with the actual position of receivables, payables and orders |
| Cash flow statement | Back, over a past period | In the annual accounts, prepared using the direct or the indirect method |
So the cash flow budget is the plan and the forecast is the updated expectation. For an established business the second is the more valuable: it shows where you are heading now, with today's customers and today's orders.
Monthly or weekly?
For annual planning, a forecast by month works well. A horizon of about a year is a sensible default: PwC advises starting with a detailed 13-week forecast and extending it to at least 12 months (source: PwC, June 2020). By month you can see the seasons, the large investments and the months in which VAT, holiday pay and loan repayments land at the same time.
When cash gets tight, a month is too coarse. The balance can swing considerably within a month, and it is the lowest point that counts. In that situation the large advisory firms work with a rolling 13-week forecast: a quarter ahead, week by week, built from specific receipts and payments. EY-Parthenon recommends building that forecast bottom-up by week, alongside a monthly forecast for the longer term, with a base case and a downside scenario (source: EY, April 2025). Deloitte points out that this kind of cash forecasting also makes conversations with the bank and the monitoring of covenants easier.
| Feature | Monthly forecast | 13-week forecast |
|---|---|---|
| Horizon | A year or longer | A quarter, with a week added every week |
| Built from | The budget: revenue, costs, payment terms | Specific items: open invoices, scheduled payments, payroll dates |
| Updated | Monthly | Weekly |
| Purpose | Planning investments and financing | Seeing the lowest point coming and managing cash |
How to build a cash flow forecast in six steps
- 01
Start from the actual balance
The balance on all business accounts on the start date. Keep your overdraft facility out of it: that is a safety net, not income.
- 02
Schedule receipts for when customers actually pay
Enter open invoices on the date customers really pay, not on the due date. Look at how they have paid over recent months. New revenue from the order book goes in at the invoice date plus the usual payment term.
- 03
Put fixed payments on their dates
Wages and payroll taxes, holiday pay or bonus months, rent, lease payments, insurance, interest and loan repayments. Include VAT or sales tax in the period in which you pay it over or reclaim it, and provisional tax payments on their due dates.
- 04
Add the variable payments
Purchases and subcontracted work follow revenue, with your suppliers' payment terms. Open purchase invoices go in on the date you will actually pay them.
- 05
Include investments and financing
Asset purchases, deposits, owner's drawings and dividends on one side; new loans, leases or grants on the other. Where you can, schedule an investment after the lowest point.
- 06
Set a floor and test a setback
Decide on the minimum balance you want to keep and check whether the forecast ever drops below it. Then work through a worse scenario: a large customer paying a month late, an order falling through.
Example: a contractor's 13-week cash flow forecast
The contractor from the introduction draws up a weekly forecast in January. His floor is €40,000. His overdraft facility with the bank is €100,000 and is not included in the balance.
| Week | Receipts | Payments | Closing balance | Notes |
|---|---|---|---|---|
| 1 | €38,000 | €31,000 | €92,000 | Opening balance €85,000 |
| 2 | €12,000 | €48,000 | €56,000 | Materials, North project |
| 3 | €9,000 | €14,000 | €51,000 | - |
| 4 | €21,000 | €62,000 | €10,000 | Wages and payroll taxes |
| 5 | €6,000 | €35,000 | -€19,000 | VAT for the fourth quarter |
| 6 | €44,000 | €18,000 | €7,000 | First instalment, South project |
| 7 | €15,000 | €22,000 | €0 | - |
| 8 | €18,000 | €60,000 | -€42,000 | Wages; materials, South project |
| 9 | €71,000 | €15,000 | €14,000 | First instalment, North project |
| 10 | €22,000 | €19,000 | €17,000 | - |
| 11 | €35,000 | €24,000 | €28,000 | - |
| 12 | €48,000 | €61,000 | €15,000 | Wages |
| 13 | €66,000 | €17,000 | €64,000 | Second instalment, South project |
Fictitious Firmfocus example.
Over the quarter as a whole he comes out fine, but from week 4 to week 12 he is below his floor, with the low point in week 8. Without a weekly forecast he would only have found out when a payment bounced. Now he has two months to act. He agrees with both clients that the first instalment is due at the start of the work rather than after the structural work, asks his builders' merchant for longer payment terms on the materials for the South project, and moves the purchase of a new van to the second quarter. The revised forecast then stays above €25,000; with the overdraft facility as a reserve, that is a responsible position.
What customers' payment behaviour does to your cash
On average, one in two invoices in commercial transactions in the European Union is paid late or not at all, and one in four bankruptcies is caused by invoices not being paid on time (source: European Commission, September 2023). The payment term in a contract is one thing; when the money actually arrives is another. So base the timing of receipts on each customer's actual payment behaviour, and track your average debtor days as a standing KPI in the management report.
Signs that cash is getting tight
- The forecast dips below your floor: even if it recovers afterwards. The lowest point counts, not the average.
- Receivables are climbing: average debtor days are going up, or a large customer is paying later as a matter of course.
- Deferred payments: you are holding back payments to suppliers or the tax authority to get through the month.
- The overdraft becomes a permanent source: being overdrawn is no longer a peak but the normal state of affairs.
- Growth without cash: revenue rises faster than cash, because stock and receivables grow along with it.
Taking action when a shortfall looms
The order matters. Start with what you control yourself and what costs nothing, and only then go to the bank.
- Invoice faster and ask for deposits or stage payments at the start of the work.
- Chase overdue debtors, following a fixed routine.
- Run down slow-moving stock.
- Agree payment terms with suppliers before you start paying late.
- Postpone investments that are not needed for this quarter's revenue.
- Arrange extra financing in good time, with the forecast as supporting evidence. See the financing options in our finance section.
SMEs and large organisations
| Aspect | SMEs | Large organisations |
|---|---|---|
| Who prepares it | The owner or bookkeeper, often in a spreadsheet | Treasury or finance, with forecasts from each business unit |
| Horizon | A year by month; when cash is tight, thirteen weeks by week | Rolling by week and by month, for the group and for each country |
| Special items | VAT or sales tax, holiday pay and owner's drawings are large items | Cash pooling, currencies, covenants and dividends |
| Pitfall | Looking at today's bank balance instead of next month's | Optimistic forecasts from units that do not manage their own cash |
In the Business Planner you build the cash flow budget as part of your financial plan, linked to revenue, costs and investments. If you are just starting out, see the cash flow forecast for startups.
The cash flow forecast is a fixed part of the planning and control cycle: it follows from the business budget and runs alongside the rolling forecast.