A Key to Financial Survival: Predict and Manage Cash Flow

Predicting and managing cash and cash flow is one of the most difficult things small businesses do.

If your company is growing, it’s important; we have all seen many growing companies blow-up and run out of cash as they’re going gang busters.  If your company is not making money, it’s obviously paramount to survival.  You need to watch every dollar – make payroll and keep the business operating.I like to put two process tools in place that really help any business predict and manage their cash flow.

The first tool which is essential for most small businesses is the ‘13 Week Cash Flow’.  This should be updated, reviewed and revised every single week of the year.  Put a reminder on your calendar.

The 13 Week Cash Flow worksheet is simple – it has weekly forecasts for cash receipts and a weekly forecast of cash disbursements.  The trick twofold:

  • Being able to predict the timing cash receipts
  • Having place holders for planned disbursements

Predicting Cash Receipts

In smaller companies, I like to detail expected payments for all outstanding invoices.  In the most companies, however, due to the size of receivable aging, assumptions must be made based on current expected cash conversion.  Accounts receivable turnover is measured on a weekly basis and strategies are developed and implemented to make improvements.  Small improvements in accounts receivable turnover has a dramatic effect on cash flow.

For example, a $10,000,000 parts distributor with $1,500,000 in accounts receivable, decreasing accounts receivable on average of days 5 days, increases cash approximately $139,000.


The worksheet needs to contain placeholders for every disbursement.  Bi-weekly payroll, benefits, rent, debt payments, operating and admin expenses, A/P, inventory purchases, cap ex, debt and other payments.  Look at your historical spends, open PO’s, current A/P.  No surprises.

Each week, review the prior week’s worksheet with actual receipts and disbursements, and recast the next 13 weeks.

The process is straight forward and over time you get better at your predictions.

Forecasting cash flow in your business makes life much better.  Less stress, more predictability, ability to make commitments, etc.

See an example of a 13 Week Cash Flow here with this simple Cash Flow Tool

The second tool to predicting and managing cash and cash flow is an Operating Plan forecasting the basic financial statements: balance sheet, income statement and statement of cash flow.  The Operating Plan uses key business drivers as its base.

I’ll discuss this in more detail later.

As always – Think Profit and Think Cash Flow!