Your business made a profit. Can it cover next week’s bills?
It’s Monday morning. A small supplier in Campbelltown has $6,000 in the bank and an $8,000 customer invoice due this week. Friday’s wages are $5,500. There’s also a supplier bill and a loan repayment. Last month’s accounts show a profit, and if the customer pays on time, everything gets covered. If they pay next week, Friday looks very different.
That’s the question a cash flow forecast can answer: which payments can you cover, and on what day?
Start with what’s in the bank
Your profit and loss report tells you how the business performed over a period. Your cash forecast starts with the money you can use today and follows when payments will come in and go out. If you prepare accounts on an accrual basis, a sale can already be in your profit figures even though the customer hasn’t paid. And a loan repayment can take cash out of the bank even though the principal portion isn’t a profit and loss expense.
Check the actual bank balance first. If some of it is already set aside for a BAS payment, include that payment on the date it’s due. If you track the reserved amount outside your available balance instead, keep it out of that balance consistently so you don’t count the same cash twice.
Run the week twice: paid on time and paid late
Here’s how the supplier’s week looks under both scenarios. The customer’s invoice is the only figure that changes.
| This week | Customer pays on time | Customer pays next week |
|---|---|---|
| Opening bank balance | $6,000 | $6,000 |
| Customer payment | $8,000 | $0 |
| Wages paid | −$5,500 | −$5,500 |
| Supplier payment | −$4,000 | −$4,000 |
| Loan repayment | −$1,000 | −$1,000 |
| Cash left after scheduled payments | $3,500 | −$4,500 |
The negative figure is a $4,500 funding gap if every payment goes out as planned. It doesn’t assume the bank will let the account go overdrawn. And even the positive Friday figure can hide a problem: if the $4,000 supplier payment and $5,500 wages fall before the customer payment clears, the business could still run short in the middle of the week. When a week looks tight, put each payment on its actual date.
Build a forecast you’ll keep using
Use a spreadsheet with one column for each of the next six weeks. Start with the cash balance, list what you expect to receive and pay, and carry each week’s closing balance into the following week. If you prefer a starting point, business.gov.au has a free cash flow template.
For money coming in, use realistic payment dates rather than simply copying invoice due dates. If a customer usually pays a week late, use the date you’re likely to see the money. Keep larger invoices separate so you can move them easily when a customer tells you their payment run has changed. Leave unconfirmed quotes out of the main forecast.
For money going out, check the bank, payroll and supplier records. Include wages, rent, loan repayments, card payments, super and tax payments on the dates you expect to pay them. Use the amounts that will actually leave the bank. If a purchase goes on the business credit card, take care not to count it again as a separate bank payment when you enter the card repayment. Add one-off costs, such as annual insurance or a vehicle repair, as soon as you know about them.
Decide what to do before Friday
If the forecast shows a shortfall, find the payment that would close the gap and check when it will actually clear. In the example above, a call on Monday can confirm whether the invoice is in the customer’s payment run or whether something is holding it up. You might also be able to put off a discretionary order, or agree revised terms with a supplier before its bill is due. If wages, super or tax payments are at risk, get advice early so you know what options are available.
A quick Monday check is enough to keep the forecast useful:
- Replace last week’s estimates with the money that actually came in and went out.
- Update expected payment dates for the invoices that matter most.
- Check which day your balance is lowest and what could change it.
- Add another week at the far end so you’re always looking six weeks ahead.