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How to build a 13-week cash flow forecast for an engineering or technical firm

A profit and loss account tells you whether last month made money. It doesn’t tell you whether you can pay wages in six weeks’ time. A 13-week cash flow forecast does: it lists, week by week for the next quarter, the cash you expect in and the cash you know is going out, so you can see the lowest point coming while there’s still time to act. This guide shows how to build one for an engineering, technical or SaaS business with 10 to 50 staff, using a spreadsheet.

Why 13 weeks, and why weekly

Thirteen weeks is one quarter. It is long enough to catch every monthly payroll, a VAT quarter and most annual bills, and short enough that you can estimate each line with some confidence. Monthly forecasts hide the problem most firms of this size actually have: cash is fine on the 1st and tight on the 28th, because salaries and PAYE land in the second half of the month, VAT arrives in a lump each quarter, and customer receipts come in unevenly.

How to build a 13-week cash flow forecast

Use a spreadsheet with one column per week (week 1 to week 13) and one row per line below. Work from cash, not invoices: a line goes in the week the money is expected to move, not the week it was billed.

1. Opening cash

Use the actual balance in your business bank accounts today, not the figure in your accounting software if bank feeds are behind.

2. Receipts from customers

This is the line most forecasts get wrong, because it is easy to assume customers pay on terms. Work from your aged debtors report in Xero, QuickBooks or Sage, customer by customer:

  • For each of your ten biggest customers, put each unpaid invoice in the week you realistically expect it, based on how that customer has actually paid over the last six months, not on their terms.
  • Group smaller customers into one line and use your overall debtor days figure to time them.
  • Add invoices you will raise in the next few weeks for work already booked, timed by when the work finishes plus how long that customer usually takes to pay.
  • Leave out anything in dispute until it is settled.

If you bill in stages, each stage goes in separately. If you don’t, this step usually shows why stage payments matter: one large end-of-job invoice sits in week 11 while the costs sit in weeks 1 to 10.

3. Payments you already know about

These are the easy lines, because the dates are fixed:

  • Net salaries on your payday.
  • PAYE, employee and employer National Insurance: due by the 22nd of the next tax month if you pay monthly and electronically (GOV.UK: pay employers’ PAYE). Add pension contributions on the date your provider collects them.
  • VAT: the return and payment are due one calendar month and seven days after the end of each VAT period (GOV.UK: submit a VAT return). Use your accounting software’s VAT report for the current quarter so far, then estimate the rest. Your accountant can confirm the figure if you’re unsure.
  • Rent, service charges, insurance, software subscriptions and leases, on their actual dates. Go through last year’s bank statements for annual and quarterly bills: these are the ones that get forgotten.
  • Corporation tax if a payment date falls inside the 13 weeks. Ask your accountant for the amount and date.

4. Suppliers and other running costs

Use your aged creditors report for bills already received, timed by when you will actually pay them. For costs not yet billed (subcontractors, materials for jobs, travel), use an average weekly figure from the last three months, then adjust for any large known job.

5. One-off items

Planned hires (the first salary, plus any recruitment fee), equipment, owner drawings or dividends, and any bonus payments. Put each in the week it will leave the account.

6. Closing cash and the low point

Closing cash for each week = opening cash + receipts − payments. That week’s closing figure is next week’s opening figure. Then find the lowest closing balance across the 13 weeks. That number, and the week it falls in, is the reason you built the forecast.

A worked example

Example Building Surveys Ltd is a made-up technical services firm with 20 staff and about £1.7m of sales a year excluding VAT. Its forecast uses these figures:

  • Opening cash: £150,000.
  • Customer receipts: £40,000 a week on average (about £2.08m a year including VAT).
  • Suppliers and running costs: £8,000 a week, so a normal week adds £32,000.
  • Net salaries: £85,000 in weeks 4, 8 and 13.
  • PAYE, National Insurance and pension: £30,000 in weeks 3, 7 and 12.
  • VAT quarter payment: £65,000, and quarterly rent: £18,000, both in week 6.

The closing balances come out as: week 1 £182,000, week 2 £214,000, week 3 £216,000, week 4 £163,000, week 5 £195,000, week 6 £144,000, week 7 £146,000, week 8 £93,000, week 9 £125,000, week 10 £157,000, week 11 £189,000, week 12 £191,000, week 13 £138,000.

For example, week 8 is £146,000 + £40,000 − £8,000 − £85,000 = £93,000. The low point is £93,000 in week 8, which looks comfortable.

Now test it. Suppose two large customers slip and receipts run 25% below plan in weeks 5 to 8: that is £10,000 a week, or £40,000 less by week 8, taking the low point to £53,000. Then the owner remembers the annual professional indemnity insurance renewal, £45,000 (a made-up figure), due in week 8 and missing from the forecast. The low point is now £8,000, in the same week as payroll.

Profit was unchanged. The forecast simply showed, seven weeks ahead, a week where wages would be at risk, while there was still time to do something about it.

What to do when the low point is too close

The useful actions are the ones inside your control, roughly in this order:

  1. Invoice finished work the same day. Every day of delay pushes the matching receipt a day later.
  2. Chase the specific invoices the forecast depends on, by name, before they are due. Our guide to chasing late payments without damaging relationships sets out a routine.
  3. Ask for a deposit or stage payment on new work starting in the period.
  4. Move discretionary spending (equipment, non-urgent hires, owner drawings) to a week after the low point.
  5. Talk to large suppliers early about the timing of a payment, rather than paying late without warning.
  6. Speak to your accountant if the low point is still close to zero after these steps. They can advise on options for your situation.

Keeping it accurate

Each Monday, add a new week 13, delete last week, and put last week’s actual receipts and payments next to what you forecast. Two things to watch:

  • Receipts consistently below forecast usually means customers are paying later than you assumed. Retime them using what they actually do.
  • The same payment surprising you twice means it belongs in the fixed lines. Add it with its real date.

The aim isn’t precision to the pound. It’s seeing the tight week before it arrives.

What you can do this week

  1. Download your aged debtors and aged creditors reports.
  2. List every fixed payment date for the next 13 weeks: payroll, PAYE, VAT, rent, insurance, subscriptions.
  3. Time your ten biggest customers’ invoices by how they actually pay, not their terms.
  4. Build the 13 columns and find your low point.
  5. Test it: what happens if your biggest customer pays three weeks late?
  6. Put 20 minutes in the diary every Monday to roll it forward.

If you’d like to see how much of your low point is caused by late payment and slow invoicing, our free Late Payment Kit includes chase-email templates and a cash calculator. You can also read how our profit and cash review works.

Find the cash you’re waiting for

A forecast shows when cash is tight. The next question is how much of your own money is sitting with customers or in unbilled work. Our free leak calculator gives you a figure in about two minutes. If it’s bigger than you’d like, book a free 30-minute call and we’ll look at where the cash is stuck and what to fix first.