What is a 13-week cash flow forecast, and how do you build one?
A 13-week cash flow shows the next quarter’s collections and payments week by week. Its value lies not in getting the forecast right but in comparing it with actuals every week and updating it.
A 13-week cash flow forecast is a short-term liquidity plan that shows a company’s cash inflows and outflows for roughly the next three months, week by week. Unlike an income statement it is not prepared on an accrual basis but using the direct method: when the money actually comes in and goes out.
Thirteen weeks is long enough to cover a quarter and short enough to forecast meaningfully at weekly detail. That is why it is used especially when cash is tight, growth is accelerating or financing is being negotiated.
Structure of the forecast
| Section | Content |
|---|---|
| Opening balance | Bank and cash total at the start of the week |
| Operating inflows | Customer collections, cheque/note collections, other receipts |
| Operating outflows | Supplier payments, salaries and social security, rent, taxes, other costs |
| Financing flows | Loan drawdowns, principal and interest payments, leasing |
| Investing flows | Asset purchases and disposals |
| Closing balance | Opening + inflows − outflows |
| Minimum cash threshold | The level the company does not want to fall below |
Each week’s closing balance is the next week’s opening balance. A week that falls below the threshold is a week that requires action.
Step by step
- Pin down the opening balance. All bank accounts and cash, ideally at their available (unblocked) amounts.
- Plan collections customer by customer. Based on the customer’s actual payment behaviour, not the invoice due date. A customer on 60-day terms who pays in 85 days on average should be forecast at day 85.
- Place payments on the calendar. Supplier terms, payroll date, social security and tax payment dates, rent, loan instalments. For where tax payments sit in a cash plan, see tax from a CFO’s perspective.
- Add known one-off items. Capital expenditure, bonuses, annual insurance premiums.
- Set the minimum cash threshold. Base it on something concrete, such as one month of fixed costs.
- Compare every week. At the end of each week, actuals are compared with the forecast, differences are explained and the thirteenth week is rolled forward.
The most important step: comparing forecast with actuals
The real value of a 13-week forecast does not appear on the day it is first built but in the weeks that follow. Comparing collections with actuals every week shows which customers and which items consistently produce variances. That knowledge improves the forecast week after week.
Early-warning indicators
A few simple indicators added to the forecast make a squeeze visible weeks in advance:
- The week in which the closing balance comes closest to the minimum threshold,
- Overdue receivables as a share of total receivables,
- The average forecast error on collections over the last four weeks.
I cover these indicators in early-warning signs of a cash squeeze. The full model is in the 13-Week Cash Flow & Early-Warning Model.
Frequently asked questions
Does a 13-week cash flow replace the budget?
No. The budget is annual and accrual-based; the 13-week plan focuses on short-term liquidity. They complement each other. Longer-term financing needs require a separate plan.
What is the difference between the direct and indirect methods?
The indirect method starts from net profit and adjusts for non-cash items and working capital movements; it is well suited to explaining the past. The direct method lists collections and payments one by one; it is more useful for short-term planning.