Profit is not cash: building a practical 13-week view for a service business

01

Why profit does not always mean cash

Revenue may be recorded before the client pays, while payroll, tax and vendor commitments leave the bank on fixed dates. Growth can make this gap wider because delivery costs are paid before collections arrive.

The income statement explains performance. A 13-week cash forecast answers a different question: when could cash become tight, and what can management do about it?

02

Start with the bank balance

The opening balance should agree with cash that is actually available. Add receipts in the week they are expected, then deduct payroll, tax, rent, vendors, debt and other committed payments. Keep confirmed items separate from assumptions.

• Use customer-level timing for material collections
• Show statutory and payroll dates clearly
• Keep uncertain new sales separate from contracted receipts
• Identify restricted or unavailable balances
• Record who owns each important assumption

03

Keep the scenarios focused

A base case, a collection-delay case and one management-action case are usually enough. Too many scenarios make the model harder to review without improving the decision.

The purpose is to identify the week when action may be needed, then test steps such as collection follow-up, payment timing or reduced discretionary spend.

04

Update the forecast every week

Replace forecast figures with actuals, move the horizon forward and explain material differences. If expected receipts repeatedly arrive late, update the assumption rather than only reporting the variance.

A smaller forecast that is reconciled and updated is more useful than a complex model that no one maintains.