One of the manufacturers we brief had a quarter this summer that looked terrific on a slide. Sales were up sharply, backlog hit a record, and new orders kept coming. In that same quarter it wrote off a multimillion-dollar receivable from a customer who wasn't going to pay, and management was telling investors a big share of that backlog would turn into revenue the very next quarter, which is a bet about timing as much as demand.
I have no idea what their treasury team's Mondays looked like. But a quarter like that is where a 13-week cash flow forecast earns its keep, because revenue is booming on paper while a chunk of what customers owe you either isn't coming or is coming later than you'd like, and somebody has to figure out which week that starts to pinch.
What a 13-week cash flow forecast actually is
Cash in and cash out, week by week, for the next quarter. It's direct method, so there are no accruals and you don't start from net income. If a customer pays in week 6, the money shows up in week 6, whenever you happened to book the sale. Each week ends with a projected balance and, if you have a revolver, how much room is left on it.
Why 13? It's a quarter, and for the first eight weeks or so you can name most of the individual payments. Past week 10 it gets mushy. Everybody who uses the thing knows that, and it's fine.
How to build the 13-week cash flow model
Any template online will get you a grid. The order I'd fill it in:
- Opening cash from the bank, by account, as of today, rather than whatever the GL says.
- Receipts by customer. Your top 10 or 20 customers each get a row, dated by how they really pay, which is often not how your terms say they pay. Everyone else can share one line built off the last few months' collections.
- Disbursements on their real dates. Payroll and payroll taxes, AP runs, rent, insurance, debt service, tax payments, committed capex. Anything big or odd gets its own line so nobody misses it.
- Financing. Draws, repayments and borrowing base availability. If your revolver floats, the Fed raised its target range a quarter point on September 16, to 3.75% to 4%, so an interest line built back in the spring is probably light.
- Roll it every Monday. Drop the week that just ended, add a new week 13, and compare last week's forecast to what happened, line by line.
Most of the value is in step five. A model built once for the lender goes stale in a couple of weeks. Rolling it weekly is how you find out which customers always pay late and which vendor somebody forgets every single month.
The receipts line is where the forecast breaks
Payroll runs when it runs and you decide when AP goes, so the disbursement side mostly behaves. Receipts depend on other companies' cash and approval chains and whatever is going on inside their business, very little of which you can see from the AR aging.
Late payment is common right now, too. Atradius surveyed more than 600 businesses across the US, Canada and Mexico and reported in mid-September that seven in ten are dealing with it, with overdue invoices averaging 23% of B2B receivables.
The usual approach is to forecast receipts off the aging and historical collection rates. That works until a customer changes behavior, and by the time the change shows up in the aging it's been going on for weeks. The earlier signal is often sitting in public. In our briefings, news about a client's own large customers comes up more often than news about competitors: a customer cutting capex guidance, getting bought, closing a plant or restructuring. Any of those can push a payment date out, usually well before the invoice goes past due.
So add one column to the receipts section that has nothing to do with math. What do we know about this customer right now? If the answer includes a guidance cut or a new owner, push their expected payment out two or three weeks and see what happens to your low point. It takes about ten minutes. Our post on early warning signs of supplier trouble covers the same signals from the other side of the relationship, and most of them apply to customers just as well.
What to do this week
Build a rough first version, even an ugly one, with your top customers on their own rows and six months of their real payment history behind the dates. Put a 30-minute review on the calendar every Monday with whoever runs AR and AP, variance first and then the new week. Circle the week with the lowest projected cash and check it against any minimum liquidity covenant.
Then write down, for each of your five biggest customers, one thing that could happen to them that would change when they pay you. Nobody on a small finance team has time to follow five customers' news every week, and that's a big part of why we built the briefing. The first one is free, and it tracks the customers and suppliers you tell it to watch.
CFOmarketIQ briefs mid market CFOs on what's happening to their customers and suppliers, starting with a free first report.
Questions CFOs ask about the 13-week cash flow forecast
What is a 13-week cash flow forecast?
A weekly projection of cash receipts and disbursements for the next 13 weeks, built on the direct method, ending in a projected cash balance and borrowing availability for each week. Lenders and turnaround advisors lean on it because it shows liquidity week by week, which a monthly forecast built from the P&L can hide.
Why 13 weeks and not a month or a year?
Thirteen weeks is one quarter. That's enough time to act on a cash crunch you can see coming, and most receipts and payments inside that window can be forecast by name rather than estimated. It also lines up with quarterly covenant testing and lender reporting, which is part of why lenders ask for it.
Should a 13-week forecast use the direct or indirect method?
Direct. The indirect method starts from net income and adjusts for noncash items, which works for a monthly or annual view but tells you nothing about which week money moves. The whole reason to build a 13-week model is timing, so it tracks cash in and cash out.
How often should you update a 13-week cash flow forecast?
Weekly. Roll it forward, add a new week 13, and compare last week's forecast with actual cash line by line. The forecast gets better through that review. Updated monthly it drifts, and a version built once for a lender is out of date within a couple of weeks.
A note on all of this: it is general information, not financial, legal or tax advice. Run anything you plan to act on past your own advisors first.