Cash-flow planning

Cash flow is timing. Profit says the year works; cash flow says whether Friday works. A four-week rolling forecast is enough for most small businesses: expected receipts by week, committed payments by week, running balance. Update it weekly and extend one week each time. When a gap appears, you have three levers: accelerate receipts, delay non-critical payments, or arrange short-term funding — in that order. A common mistake is treating profit and cash as the same thing, then getting caught short even in a profitable month. A business can be profitable on paper while waiting weeks for customers to pay, leaving no cash for payroll on Friday. Build the habit of checking your bank balance against upcoming commitments separately from checking your profit and loss statement, because they answer different questions. To decide how far ahead to forecast, match the rhythm of your biggest cash swings. If payroll happens every two weeks and a few large customers pay slowly, a four-week view usually catches the danger zone before it becomes a crisis. Businesses with longer payment cycles or seasonal swings may need to extend the forecast further out, but starting simple and extending is easier than starting complicated. You know your forecast is doing its job when a coming shortfall shows up two or three weeks before it happens, giving you time to act calmly instead of scrambling. If a cash crunch keeps surprising you despite keeping a forecast, the problem is usually that receipts or payments are recorded too optimistically. Go back and use the dates money actually moves, not the dates you hope it will. A contractor kept solid profit margins all year but nearly missed payroll twice because large clients paid sixty days late while suppliers wanted payment in fifteen. Building a simple four-week rolling forecast exposed the gap two weeks in advance each time, giving him room to ask one client for a partial early payment rather than scrambling for a loan at the last minute.

Key takeaways

• A four-week rolling forecast is enough for most small businesses: expected receipts by week, committed payments by week, running balance.
• When a gap appears, you have three levers: accelerate receipts, delay non-critical payments, or arrange short-term funding — in that order.
• Payment timing, not profitability, causes most small-business cash crises.

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