13-Week Cash Flow Forecast: A Small Shop's Early Warning

Why do profitable shops still run out of cash?

The profit and loss account tells you whether the business earns more than it spends over a month. It does not tell you whether there will be enough money in the account on the Thursday the supplier is due. Those are different questions, and the second one is the one that closes businesses.

Most small businesses do not hold much cushion. The JPMorgan Chase Institute's 2016 study of 600,000 US small businesses found that the median firm held enough cash to cover 27 days of outflows if its inflows stopped. A quarter held fewer than 13 days. A later study from the same institute, published in April 2020 and covering 1.4 million US businesses in 25 metro areas, found that the median business in each metro area held only 11 to 18 days. The exact number varies by sector and year. The point does not: for most small businesses, one large payment arriving in the wrong week is enough to cause a crisis.

A forecast does not prevent a bad week. It moves the moment you find out about it from the day itself to several weeks earlier, when you still have options.

Why forecast weekly instead of monthly?

A monthly forecast hides the problem. A month in which inflows exceed outflows can still contain a week in which the account goes negative, because rent and wages tend to cluster around the turn of the month while takings arrive evenly.

The common professional format is a rolling 13-week forecast: a quarter ahead, one column per week, rolled forward every week.

What goes into a 13-week cash flow forecast?

Start from cash you can actually spend: bank balances plus cash in the till and cash boxes. Do not include money that customers owe you; that comes in as a receipt in the week you expect it.

Then, for each week:

Receipts

Expected takings, from your own sales history for the same weeks, not your hopes.
Card settlements, in the week they reach the bank (often a day or two after the sale), net of fees.
Collections from customers on credit, in the week they usually pay, not the week the invoice is due.

Payments

Fixed costs on their real dates: rent, wages, loan repayments, subscriptions.
Supplier invoices on their due dates, in the currency they are billed, converted at a stated rate.
Tax payments: VAT or sales tax, payroll taxes, instalments.
Stock purchases you have committed to.

The minimum cash balance. Decide in advance the lowest balance you are willing to see, typically two to four weeks of fixed costs. The forecast's job is to show you every week that falls below it.

This is where clean books pay off. A forecast built on a ledger with uncategorised transactions, unmatched card settlements or missing supplier invoices inherits all of those errors. Close the month first, then forecast from the closed numbers.

A worked example: the dollar invoice that lands with the VAT bill

A phone and electronics shop keeps its books in euros. Opening cash across the bank and the cash box is 14,000. From its sales history, a normal week brings in about 11,000 of takings, and the shop spends about 7,800 a week replenishing stock and 800 on card fees and sundries, so normal trading adds roughly 2,400 a week.

Fixed payments: rent of 3,200 in weeks 1, 5 and 9; wages of 7,800 in weeks 4 and 8. A distributor invoice for USD 12,000 falls due in week 6; at the shop's working rate of 1 EUR = 1.08 USD, that is 11,111. The quarterly VAT payment of 5,400 is due in week 7. The owner's minimum cash line is 8,000.

Week	Trading	Rent	Wages	Supplier	VAT	Closing cash
1	2,400	(3,200)				13,200
2	2,400					15,600
3	2,400					18,000
4	2,400		(7,800)			12,600
5	2,400	(3,200)				11,800
6	2,400			(11,111)		3,089
7	2,400				(5,400)	89
8	2,400		(7,800)			(5,311)
9	2,400	(3,200)				(6,111)

Nothing here is unusual. Every payment is known. But the forecast shows the balance dropping below the 8,000 line in week 6 and going negative in week 8, when wages are due. Seen in week 1, that gives the owner five weeks to act.

How do you stress-test the forecast?

Two quick sensitivity checks:

The dollar strengthens to 1 EUR = 1.02 USD before payment. The invoice becomes 11,765, another 654 out in week 6. (Why the amount you owe moves with the rate is explained in multi-currency bookkeeping for small importers.)
Takings run 10% below history for the whole period, about 1,100 a week, while stock replenishment stays as planned. By week 7 the balance is 7,700 lower than shown.

What can you do when the forecast shows a shortfall?

Choose levers early:

Ask the distributor to split the invoice, half in week 6 and half in week 10. That moves 5,556 out of the danger zone. A supplier asked five weeks ahead is far more flexible than one asked on the due date.
Slow replenishment of slow-moving stock. If accessories that sell slowly account for 1,500 of weekly purchases, pausing them for five weeks keeps 7,500 in the account. Serial- and lot-level stock data tells you which lines those are.
Arrange a facility before you need it. An overdraft agreed while the books show a healthy business is easier to get than one requested during a shortfall.

None of these is dramatic. All of them are only available because the dip was visible in advance.

How do you keep a rolling forecast up to date?

A forecast that is built once and left alone is worse than none, because it gives false comfort. The routine that works:

Every week, replace last week's forecast column with actuals.
Note where actuals differed and why. If takings are consistently 5% below forecast, your forecast is optimistic; adjust it.
Add the new 13th week.
Look first at the lowest closing balance in the next eight weeks, and the week it occurs.

Many accounting systems now produce parts of this automatically from receivables, payables and recurring entries. That helps, as long as you still own the assumptions: payment habits of particular customers, seasonal patterns, and the rate you are using for foreign-currency invoices.

What can a cash flow forecast not tell you?

A forecast is only as good as its inputs. It will not predict a sudden drop in demand, a supplier demanding prepayment, or a customer going bust. What it does is make the known payments impossible to forget and turn surprises into deviations you can measure. Treat the result as a range, not a single number, and widen the range when your data is thin.

How this looks in GrowMore

GrowMore does not forecast cash: the 13-week forecast above stays your own spreadsheet. What GrowMore gives you is its starting position, read from posted documents: the balance of every cash box and bank account, customer and supplier statements with an ageing of what is owed and since when, and the period's trial balance, each exportable to Excel. Those are the opening cash, and the raw material for the collections and payments in your first columns. The features page lists the reports.

What to do this month

Write down your actual cash today: every bank account plus every till and cash box.
List every fixed payment for the next 13 weeks with its date and amount.
List supplier invoices and tax payments due, with foreign-currency amounts and the rate you assume.
Estimate weekly takings from the same weeks last year or the last eight weeks.
Set your minimum cash line and mark every week that falls below it.
For the first week below the line, write down two levers and who you would need to call.
Book 30 minutes in the same slot every week to roll the forecast forward.

Frequently asked questions

Why 13 weeks?

Thirteen weeks is one quarter. It is long enough to see a quarterly tax payment and a large supplier invoice coming, and short enough that the figures rest on what you already know. You roll it forward one week at a time.

Is a cash flow forecast the same as a cash flow statement?

No. A cash flow statement reports cash that has already moved, grouped by activity. A forecast estimates the receipts and payments still to come, week by week, so you can act before a shortfall.

Should money my customers owe me count as cash in the forecast?

No. Start from cash you can spend today. Money owed to you enters the forecast as a receipt in the week you expect that customer to actually pay, based on their habits rather than the due date.

Sources

JPMorgan Chase Institute, 'Cash Flows, Balances, and Buffer Days: Insights from 600,000 Small Businesses' (2016), median small business holds 27 cash buffer days. https://www.jpmorganchase.com/institute/all-topics/business-growth-and-entrepreneurship/report-cash-flows-balances-and-buffer-days
JPMorgan Chase Institute, 'Small Business Cash Liquidity in 25 Metro Areas' (April 2020; 1.4 million businesses; metro medians of 11 to 18 cash buffer days). https://www.jpmorganchase.com/institute/all-topics/business-growth-and-entrepreneurship/small-business-cash-liquidity-in-25-metro-areas
IASB, IAS 7 Statement of Cash Flows (definitions of cash and cash equivalents). https://www.ifrs.org/issued-standards/list-of-standards/ias-7-statement-of-cash-flows/