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Why do profitable businesses run short of cash?
A cash flow forecast, or cash flow projection, shows the money you expect to come in and go out, period by period, and the cash left at the end of each. It answers the question profit can’t: will there be enough in the bank to pay wages, suppliers, the ATO and the loan when each falls due?
Profit and cash part ways all the time. A builder can win the biggest job in its history and run short on it, paying subcontractors weekly while progress claims take 30 days or more to arrive. A café can trade profitably all year and still be squeezed in winter, when takings dip and a quarterly business activity statement (BAS) falls due.
Growth makes it worse. A wholesaler selling $100,000 a month that gets paid in 45 days always has about $150,000 owed to it, and every lift in sales adds to that before a dollar arrives.
A forecast shows the squeeze months ahead, while you can still act:
- Chase debtors or tighten payment terms before the low point, not during it.
- Arrange or increase an overdraft while the numbers still look good.
- Time big purchases, such as equipment or a fit-out, for months the cash can carry them.
- Set GST aside as you collect it, so each BAS is already covered.
What goes into a cash flow forecast?
Start from your real bank balance today. Then put each receipt and payment in the period it hits the account, not when you send the invoice or get the bill.
- Receipts: cash and card sales; customer invoices, collected on your real debtor days (30-day terms can mean 45 days in practice); grants, refunds and asset sales.
- Payments: suppliers on their terms, wages, PAYG withholding, super, rent, insurance, loan repayments and equipment.
- GST: you collect it on sales and claim it back on purchases. The difference goes to the ATO with each BAS, monthly or quarterly.
- Tax: PAYG instalments through the year, and any income tax still owing after you lodge your return.
- Seasonality: summer peaks, winter lulls, the Christmas stock build, harvest, and end-of-financial-year sales in June.
- One-offs: insurance premiums, registrations, annual licences and end-of-year bonuses.
- Funding: overdraft and loan drawings, equity raised, and what the owners put in or take out.
Should the forecast be monthly or 13-week?
A monthly cash flow forecast over 12 months or more is the planning view. It shows the seasonal low point, how big a facility you need, and whether a new hire or a fit-out is affordable. Banks commonly ask for one with a loan application.
A 13-week cash flow forecast is the survival view: week by week for one quarter, built from expected receipts and payments, and rolled forward every week as actuals replace the oldest week. Advisers and lenders ask for one when cash is tight, in a turnaround, or when covenants are close.
Whichever you keep, keep it current: swap forecasts for actuals as each period closes, then look again at the next low point.
Start with the monthly view. Our models run monthly at the finest, which gives you the 12-month and multi-year picture. If you also need week by week, a simple 13-week sheet kept by whoever pays the bills, checked against the model’s monthly totals, does the job.
Why link cash flow to the other statements?
A cash flow forecast template on its own is a list of estimates. Nothing checks that receipts match the sales in your profit forecast, that the GST you pay matches the GST you collected, or that the loan you repay is the loan you owe.
Built inside a three-statement model (a three-way forecast), cash follows from everything else. Sales become debtors, then receipts. Purchases become creditors, then payments. Equipment adds to assets; repayments reduce the loan. Closing cash lands on the balance sheet, and the balance check proves nothing has leaked.
It also tells you what a cash forecast alone can’t: whether you are making money, what you owe the ATO at each month end, and how much cash is tied up in debtors and stock.
Can I get a cash flow model built free?
Tell us about the business, attach last year’s accounts, management accounts or a budget, and say what the forecast is for. We build your cash flow model free in Excel, starting from your latest balances: monthly, quarterly, half-yearly or annual, for up to 30 years.
It can carry debtor, creditor and stock days (month by month if your trade is seasonal), GST settled with your BAS monthly or quarterly, loans, and an overdraft that draws when cash runs low, plus an upside and a downside case. Every input sits in blue with its source.
Every model is checked to balance in every period and reviewed by our team before it reaches you, usually within the hour. Preview every sheet before you download.