How to spot a cash problem eight weeks early
A worked example of a 13-week cash forecast, the ten warning signs to check every Monday, and a free checklist to run them on your own numbers.
Pete Asman
Key takeaways
- A 13-week cash forecast tracks cash in and out week by week for the next quarter: far enough ahead to act, close enough to be accurate.
- Cash problems rarely arrive suddenly. They build from small changes, such as customers paying a little slower, margin slipping and stock creeping up.
- In our worked example, weekly sales barely change, yet cash falls below the £250,000 floor in week 9 because debtors keep growing.
- Ten checks run every Monday catch most warning signs. Three or more red flags means a cash problem is on its way.
- Testing a downside, such as sales 10% lower and customers a week slower, shows how much room you really have.
The short answer
You spot a cash problem early by forecasting cash week by week for the next 13 weeks, and checking every Monday whether it stays above a minimum level you’ve agreed. Most warning signs show up eight or nine weeks before the bank balance does.
Why 13 weeks
Thirteen weeks is one quarter. It’s long enough to see a problem coming and do something about it, such as chasing debtors, delaying a purchase or talking to the bank. It’s short enough that the numbers are mostly known: orders in the book, payroll, VAT, rent and supplier terms.
Monthly management accounts look backwards. A 13-week forecast looks forwards.
A worked example
This is the example built into our 90-Day Forecast Toolkit. The business starts with £326,000 in the bank and has agreed a minimum cash level of £250,000.
- Week 1: weekly revenue £233,079, gross margin 34.0%, owed by customers £519,467, cash £308,612
- Week 5: weekly revenue £228,452, gross margin 32.7%, owed by customers £607,177, cash £289,621
- Week 9: weekly revenue £223,917, gross margin 31.3%, owed by customers £709,696, cash £237,544
- Week 13: weekly revenue £219,472, gross margin 29.9%, owed by customers £829,526, cash £150,243
Nothing here looks dramatic. Revenue drops about 6% over the quarter. Margin slips a point or so a month. But customers pay a little slower each week, so the amount owed grows by over £300,000, and that money isn’t in the bank. Cash falls through the floor in week 9.
Even the upside scenario, with stronger sales, ends the quarter needing action. The problem isn’t sales. It’s how fast cash comes in.
The ten checks to run every Monday
- Does cash drop below your floor in any of the next 13 weeks?
- Is your lowest cash week inside the next eight?
- Are any of VAT, payroll, rent, loan repayments or annual bills missing from the forecast?
- Are debtor days up by three or more over the last eight weeks?
- Is more than 10% of what you’re owed over 60 days late?
- Do your five biggest customers owe more than half the total?
- Has gross margin been below target in three of the last four weeks?
- Are two or more cost lines growing faster than revenue?
- Is stock more than 25% above its normal level?
- If sales fell 10% and customers paid a week later, would cash break the floor?
Three or more “yes” answers means a cash problem is on its way. Give each one an owner, agree the action that moves your lowest week, and take it to your next leadership meeting.
Doing it by hand, in Excel, or automatically
You can run these checks by hand with the free checklist. The 90-Day Forecast Toolkit does it in Excel from eight weeks of your actuals, with four scenarios and a one-page dashboard. AI Grid does it automatically from your finance and operations data and looks twelve months ahead, not thirteen weeks.
See it on your own numbers. Book a 30-minute demo to see AI Grid forecast cash, margin and stock on data like yours, or get the free 13-week cash early-warning checklist.
