Profitable but Short of Cash: Build a Weekly Cash Forecast for Decisions
Profit does not identify next week’s payroll cash
A profitable business may be waiting for customer payments while payroll and materials must be funded first. Treating sales as immediate receipts overstates liquidity. A cash forecast should show available cash by period and identify decisions needed before a shortfall arrives.
This is a forward-looking management tool, not a historical cash-flow statement under accounting standards or a credit assurance. Thailand’s Department of Industrial Promotion explains the planning value of receipts, payments and net cash. This article develops that principle into a weekly workflow with a hypothetical decision example.
Start with cash that is actually available
Use one cutoff date for all accounts and distinguish usable cash from restricted balances, deposits and uncleared receipts. A loan application is not a certain inflow. Even an approved facility requires verification of drawdown conditions and timing. Show unresolved funding separately rather than blending it into a seemingly secure balance.
Set a buffer based on business needs, such as essential spending while collections are pending, rather than a universal figure. Distinguish falling below the buffer from becoming negative. The first is an early decision signal; the second means current commitments cannot be met without a change.
Translate receivables and payables into cash dates
On the receipts side, list invoices with due dates, expected collection dates, follow-up owners and reasons for the assumptions. Flag disputed invoices or unaccepted work. Separate prospective sales from confirmed invoices rather than combining them without an uncertainty marker.
On the payments side, schedule payroll, taxes, suppliers, rent, debt service and capital spending by actual payment dates. Identify legal or contractual deadlines and items still awaiting approval. Classification supports analysis; it does not authorize unilateral postponement of due obligations. Check consequences and obtain the relevant agreement first.
Example: a positive month-end hides a weekly buffer breach
Assume opening usable cash of THB 300,000 and an illustrative THB 100,000 buffer. Week one receives THB 200,000 and pays THB 250,000, leaving THB 250,000. Week two receives THB 50,000 and pays THB 220,000, leaving THB 80,000. Week three receives THB 300,000 and pays THB 100,000, recovering to THB 280,000. All figures are hypothetical, not client data or universal thresholds.
A three-week total hides the THB 20,000 buffer shortfall in week two. Management must decide how and when to address that gap rather than assuming week-three receipts remove the risk. If receipts and payments fall on different days within a week, expand the tight period into daily detail; week-end balances can also conceal a negative day.
Test delayed receipts and feasible responses
If the THB 200,000 receipt from week one moves to week three, week one closes at THB 50,000 and week two at negative THB 120,000 before recovery in week three. A negative forecast is a funding gap requiring action, not an assumption of automatic bank overdraft availability.
Options may include resolving billing documentation, negotiating supplier payment dates, deferring uncommitted investment or evaluating confirmed funding. Record the amount, effective date, owner, cost and risk for each. Early-payment discounts can reduce profit; deferred investment can affect capacity. Compare operating consequences as well as cash.
Make the forecast a decision cycle
Choose a horizon that covers the business cycle; 13 weeks is one working approach, not a requirement. Each week, enter actuals, compare variance and append a new week. Separate amount differences from timing differences to improve assumptions. Do not rewrite historical forecasts to make them appear accurate in hindsight.
The management view should show the lowest cash point, decision deadlines and the three largest drivers with owners and follow-up dates. Kerwin & Vance lists management reporting and internal-control services. Starting with traceable cash movements focuses consultation on business decisions before choosing software without knowing the report’s purpose.
