13-Week Cash Flow Forecast
Let's take a look at one of the most useful tools in all of small business (actually, businesses of any size should be using this).
Imagine a financial roadmap for the next three months. That's what a 13-week cash flow forecast is. It's a simple tool to predict your business's incoming and outgoing cash over a short period, helping you stay afloat and make informed decisions. Remember: a tiny slip of cash flow in the wrong direction adds up fast!
Think of it like this:
Cash in (income): All cash deposits into the business from sales, receivables, etc.
Cash out (expenses): All cash payments for expenses like rent, salaries, bills, material purchases, and anything else your business spends money on.
Here's a step-by-step breakdown on how to build your 13-week cash flow forecast:
1. Gather Information:
o Grab the transactions from your bank account(s) and fortunately these are usually downloadable in an easy-to-use excel format.
2. Categorize Inflows (sales):
o Filter those transactions and mark your inflows as sales... breakout by as many sales channels make sense for your business (i.e. wholesale, retail, ecommerce, etc.).
3. Categorize Outflows (expenses):
o Now filter all the cash outflows. Stick to 5-10 basic line items (don't overcomplicate this)… things like rent, payroll, utility bills, supplies, inventory purchases, credit card payments, etc.
4. Week By Week Breakdown:
o Do this repeat this exercise until you have several weeks or months of history. (Hint: the more weekly history you have, the easier it is to forecast.)
5. Time to make projections:
o Every line is a simple estimation.
o Weekly averages are your best friend here.
o Project your sales for the next 13 weeks based on historical data, trends, or anticipated promotions.
o Plug in your known fixed costs like rent, salaried payroll, etc.
o Factor in variable costs like supplies based on sales projections.
Here's what it should look like:
Keep it simple: You can use a spreadsheet or even a piece of paper to create a table. List the weeks, income expected, projected expenses, and the resulting cash flow (inflows minus outflows) for each week. Once you're up and running, keep your worksheet updated every week. It's not hard since banks only process transactions Monday-Friday.
Make better decisions: Knowing potential cash crunches allows you to take action fast (delaying payments, finding additional funding, etc.). And your budgeting, purchasing planning, and inventory management will improve by leaps and bounds.
Here's a simple template if you need help getting started. P.S. we also help with preparing and managing a cash flow forecast for you!
Homework
This week's assignment:
Build a 13 week cash flow forecast, have it live by next week
Go back and add at least 6 weeks of history, then forecast out 13 weeks
Keep it updated for at least a month and watch your forecasting improve
Do it long enough and good things will happen in your business
Cash Flow Help
Want help building and maintaining a cash flow forecast? Fill out the form below and we'll be in touch soon.
