Profitable businesses still run short of cash. Customers pay late, suppliers want paying on time, and tax, payroll and rent all land on fixed dates. The difference between a tight month and a crisis is usually how early the owner saw it coming. A light, regular routine is often enough to stay ahead.
Start with a 13-week view
A rolling 13-week cash flow forecast covers roughly a quarter and is short enough to keep accurate. List the cash you expect to come in each week and the cash you expect to go out, then track the closing balance. It doesn’t need to be sophisticated. A spreadsheet is fine, and many accounting packages can produce a basic version from your existing data.
- Use the dates customers actually pay, not the dates on your invoices.
- Include the lumpy items: VAT, corporation tax, PAYE, insurance renewals, annual subscriptions and loan repayments.
- Add any planned spending on stock, equipment or hiring.
- Roll it forward each week, replacing estimates with actual figures.
A weekly half hour
Pick a fixed time each week to update the forecast and look at three things: what came in, what is overdue and what is due out in the next fortnight. Chase overdue invoices promptly and politely, and note any customer whose payment pattern is changing. Late payment is easier to resolve in its first week than its sixth.
A monthly check
Once a month, step back from the detail. Compare the forecast with what actually happened and ask why any big differences occurred. Review your debtor list by age, check your terms with key suppliers and look at whether any regular costs could be reduced or moved to a better date. It is also a good moment to look at the next quarter’s tax bills and confirm the money is set aside.
Levers you can pull before you borrow
Before reaching for finance, it is worth using the tools already in your hands:
- Invoice promptly, with clear payment terms and bank details.
- Offer easy ways to pay, such as card or direct bank payment links.
- Ask for deposits or stage payments on larger jobs.
- Agree payment dates with suppliers that line up with when your customers pay.
- Hold less slow-moving stock where you can.
When finance can help
Sometimes the gap is structural. A business that sells on 60-day terms but pays suppliers in 30 will always have cash tied up, and that grows as the business grows. In that situation, finance designed for working capital can be a sensible tool rather than a last resort. Invoice finance releases cash against unpaid invoices, and a revolving credit facility gives you a limit you can draw on and repay as needed.
The forecast you have built is useful here too. It shows how much you need, for how long and how it will be repaid, which are the first questions any lender or broker will ask. Arranging a facility while trading is steady is usually easier than looking for one when the balance is already close to zero.
This article is general information, not financial advice. Loanleaf is an introduction service, not a lender or broker, and is not authorised by the FCA.
