Forecast cash for the next 13 weeks

In the previous lesson we compared actual against budget and ended with a monthly decision. Yet many owners see profit in the report and still find the bank account tight at month end. The reason is that profit and cash are two different things. In this lesson we build a thirteen-week cash forecast from your system data, and follow it from WhatsApp in two messages.

Why profit is not enough

Profit is recorded when the invoice is issued; cash arrives when the invoice is collected. Weeks sit between the two moments. Three gaps create most of the surprises: a credit sale books revenue today and reaches the bank sixty days later, an inventory purchase takes cash out today and only becomes a cost when the goods are sold, and VAT payment leaves the account on the filing date of your registered cycle with the Zakat, Tax and Customs Authority rather than on the date of the sale. That is how a profitable month can contain a broke week.

Step 1: start from a real balance, not an estimate

Open week one with the actual balance of your bank accounts and cash on hand as it stands today, not as you expect it to be. A forecast built on an estimated opening balance inherits that error in every week after it. If you hold several accounts, combine them into one figure, and exclude anything already reserved for a committed obligation.

Step 2: place receipts on their due date, not the invoice date

Your system already knows which invoices are unpaid and when they fall due. Put each invoice in the week you expect to collect it, not the week it was issued. To stay realistic, sort receipts into three grades: confirmed, from customers who pay on time; likely, from customers who typically run two weeks late, so shift them by their usual delay; and doubtful, long-overdue debt that you exclude until it is actually collected. Including a doubtful amount is worse than leaving it out, because it hides the shortfall.

Step 3: list committed payments first

Begin with what cannot be moved: salaries, rent, loan instalments, supplier dues on their dates, and the tax payment on its filing date. Then add variable spending such as purchasing and operations. The order matters: when a squeeze appears you need to know what can be deferred, and what can be deferred sits at the bottom of the list, never at the top.

Step 4: find the week your balance breaks the safety floor

Set a safety floor you will not go below, one month of payroll for example. Then read the table looking for the first week that breaks it. The numbers below are illustrative and hypothetical, for a small contracting business:

Viewed as a whole month it looks balanced, but week four is the danger point. The fix belongs to the weeks before it, not to the week itself: pull in the collection of one large invoice, move a purchase order by a week, or agree a payment schedule with a supplier. Discovering week four while you are standing in it leaves you only expensive options.

Following it from WhatsApp

The owner of a contracting business does not open spreadsheets. On Sunday morning he sends a message:

Owner: how does cash look over the next weeks

System: the balance holds through week three. In week four it drops below your safety floor, because payroll lands in the same week as a supplier payment.

Owner: what is the largest overdue amount we can collect

System: the largest uncollected invoice sits with one customer and is past its due date; collecting it this week keeps the balance above the floor.

In two messages he found both the risk and the lever available to him, and left with one decision: chase that invoice before week two. That is the difference between a system you read and a system you ask. Read more about running operations from WhatsApp and issuing invoices and chasing collection from WhatsApp.

Checklist before you trust the forecast

• Is the opening balance real, taken from the statement rather than estimated?
• Is every receipt placed in its due week, not its invoice week?
• Is doubtful debt excluded until it is actually collected?
• Are salaries, rent, instalments and tax all included?
• Do you have a written safety floor for the balance?
• Is the forecast refreshed weekly and rolled forward one week at a time?