You bought into the idea that a 13 week cash flow plan would be helpful for your business, so how do you create it? Here are some of the steps:

1. Accounts receivable collection. Do a download on your accounts receivable and project out when do you think you’ll collect the current accounts receivable.

2. New Revenues. Have a separate collection item for new revenues. What revenues do you expect to come during the next 13 weeks? And then put in what will the timeline be between the shipment and collection. This combined with your receivables will give you core cash info.

3. Other receipts. Are there other receipts that you get that might be outside your core shipments? This could either be investment income, commission income, or perhaps other income you have coming from different sources.

4. Accounts payable. Do a download on the accounts payable. Get that information and determine when the various current bills that you have will be paid.

5. Payroll. Base your projection on your upcoming payroll and when those will be paid. Remember to include the timing on the related payroll taxes and things like unemployment insurance.

6. Operating expenses. Put down other major operating expenses that you have payments for. They’ll be over and above what you currently have within your accounts payable.

7. Inventory items. If you’re a manufacturing or distribution company and you have inventory, this will be a separate line item for you to forecast. Put that in to cover your expected payments on inventory items that are over and above what you currently have in accounts payable.

8. Other expenses. What other expenditures will you have for other expenses that need to be put in?

Those are some of the individual pieces. Now then, you need to tie that together. Your rolling scheduled begins will the beginning cash balance. Then you would take the receivables that you expect to come in and back away the payments that you need to have and that comes to an ending cash balance. That ending balance becomes the beginning balance for your next period and continuing next period until you’ve gone through the cash flow for the whole 13 weeks. Finally, take a look at, see where there are any particular peaks and valleys. W hat might you need to change to eliminate any negative cash balances projected.

So, there’s the mechanics of putting together your first 13 week cash flow forecast. Do this and you’re farther ahead than most companies. You almost always find that you learn some things in the process about your cash needs and how your business is operating.

Jon Paul, MBA, CPA, CMC, CM&AA

President, Value Added Finance Resources
Bringing new insights on results and maximizing company value