What is a 13-week cash flow forecast?
Short answer
A 13-week cash flow forecast is a week-by-week projection of the cash a business expects to receive and pay out over the next quarter. It starts from the actual bank balance, adds expected receipts, subtracts expected disbursements and shows the closing balance for each week. Its purpose is to reveal cash shortfalls early, and it is rolled forward every week.
A 13-week cash flow forecast tracks actual cash, not profit. Thirteen weeks is one quarter (52 weeks divided by four), long enough to cover payroll cycles, rent, tax payments and loan installments, and short enough that you can still forecast individual customer payments with some accuracy. Lenders and turnaround advisers often ask for one when cash is tight, but any business can use it to see a shortfall before it arrives.
How is a 13-week cash flow forecast built?
Most 13-week forecasts use the direct method: list the cash that will actually come in and go out each week. The columns are the 13 weeks. The rows are:
- Opening cash, which is the bank balance for week 1 and the previous week's closing cash after that.
- Receipts: collections from customers (by the week you expect each invoice to be paid), cash sales, loan draws and other inflows.
- Disbursements: payroll and benefits, rent, supplier payments, taxes, loan interest and principal, capital spending and other outflows.
- Net cash flow: receipts minus disbursements.
- Closing cash: opening cash plus net cash flow.
- Optionally, minimum cash policy and available credit, to show headroom.
Two relationships tie the rows together: net = receipts − disbursements, and each week's opening cash equals the prior week's closing cash. With opening cash in row 4, receipts in row 5, disbursements in row 6, net in row 7 and closing in row 8, week 1 (column C) uses =C5-C6 for net and =C4+C7 for closing, and the opening cell for week 2 is =C8.
How do payroll and a tax payment affect a 13-week forecast?
A company opens week 1 with $120,000 in the bank.
| Week | Receipts | Disbursements | Net | Closing cash |
|---|---|---|---|---|
| 1 | 48,000 | 61,000 | −13,000 | 107,000 |
| 2 | 52,000 | 38,000 | 14,000 | 121,000 |
| 3 | 45,000 | 70,000 | −25,000 | 96,000 |
| 4 | 50,000 | 42,000 | 8,000 | 104,000 |
Suppose payroll falls in weeks 1 and 3 and a tax payment also lands in week 3. Cash then dips twice before recovering. Over the four weeks the balance falls by $16,000, from $120,000 to $104,000, and the low point is $96,000 at the end of week 3. A monthly view would hide that dip, which is what a weekly forecast is for.
How do I keep a 13-week cash flow forecast up to date?
- Forecast receipts by when customers pay, using the aging of receivables and payment history, not by invoice date.
- Put each payment in the week it clears, including irregular items such as quarterly taxes, insurance premiums and annual fees.
- Roll it forward every week. Replace the week that has just ended with actual figures, add a new week 13 at the end, and compare forecast with actual to learn where your timing assumptions are weak.
- Start each new version from the bank statement, so the opening balance of week 1 is a fact and not an estimate.
- Add scenarios, such as a delay of key customer payments by two weeks, and watch the lowest closing balance.
How is a 13-week forecast different from a P&L or a DCF?
It is not a profit and loss statement and it does not include non-cash items such as depreciation. It is also not a long-range plan. For multi-year valuation or investment decisions, see discounted cash flow, which discounts annual free cash flows instead of tracking weekly bank movements.
The 13-week cash flow forecast sheet is a template for this kind of forecast, and the blog post on the 13-week cash flow forecast covers the method in more depth.