A weekly cash flow forecast is one of the most important housekeeping tasks in your business. Many a business has failed because of poor cash flow management.
Make sure you estimate cash flow weekly rather than monthly. Too much can happen in a month, weekly forecasts are more granular and accurate.
Don’t try to forecast too far into the future for your operational cash flow, anything past 13 weeks is more strategy than operations and should be done separately. 13 weeks usually fits on one page so you can see it all at once.
A lot of people make the mistake of adding lots of small expenses but only including one line for income. Turn that upside down and put more emphasis on receipts and group the easier to estimate small fixed expenses into less lines. Again try to fit it all on one page.
Go through your debtors one by one and split out at least twenty of the biggest debtors and put the estimated amounts and receipt date for each invoice for these debtors in your forecast.
Use discounted pipeline to calculate receipts for the smaller debtors (if you have a lot of debtors). Also use pipeline to calculate less immediate weeks – budget isn’t good enough because it will always predict exactly the budget, that’s not very useful. So, in essence, make sure you focus on the large and the variable and not the small and fixed.
Remove the first column each week and add a new one to the end. Make sure you adjust your assumptions over time based on actual results.
Good cash flows get more and more accurate over time, the most important thing to do, like most things in life, is to start.
It should look something like this…