How to prepare a cash flow forecast, an invented 13-week example for an IT firm with a software license renewal, ways a firm can improve cash flow around payroll, and the article topics.
How to prepare a cash flow forecast at a Johns Creek, GA IT firm before a large bill comes due
A forecast is a week-by-week list of the cash a business expects to receive and pay. For an IT firm with a large hardware invoice due next month, it shows whether the bank balance stays above the cushion the owners want:
- Open with today's bank balance.
- List receipts in the week each client has paid in the past, not the week the invoice goes out.
- Put payroll on its real paydays, then rent, software and other fixed bills.
- Add the large bill in the week it comes due.
- Work down the weeks to find the smallest ending balance.
- Compare that low point with the cushion the firm wants to keep.
A 13-week cash flow forecast in Johns Creek, GA, worked through with software license renewals
Illustration only, invented figures: an IT firm starts with $62,000 in the bank, pays $21,500 of payroll every other week, pays $6,800 of rent every fourth week and renews $18,400 of software licenses in week 6.
| Week | Cash in | Cash out | Ending balance |
|---|---|---|---|
| Week 1 | $14,500 | $28,300 | $48,200 |
| Week 2 | $9,800 | $0 | $58,000 |
| Week 3 | $16,200 | $21,500 | $52,700 |
| Week 4 | $11,400 | $0 | $64,100 |
| Week 5 | $13,900 | $28,300 | $49,700 |
| Week 6 | $8,700 | $18,400 | $40,000 |
| Week 7 | $15,600 | $21,500 | $34,100 |
| Week 8 | $12,300 | $0 | $46,400 |
| Week 9 | $22,000 | $28,300 | $40,100 |
| Week 10 | $17,100 | $0 | $57,200 |
| Week 11 | $9,400 | $21,500 | $45,100 |
| Week 12 | $14,200 | $0 | $59,300 |
| Week 13 | $12,600 | $28,300 | $43,600 |
Receipts over the 13 weeks total $177,700, and the balance ends at $43,600. The invented forecast's low point is week 7, at $34,100, the payroll week right after the license renewal. If the owners want a larger cushion than that, the shortfall and its week are the two numbers to bring to a funding conversation, and a line of credit drawn for those weeks is one way to cover them.
How can a business improve cash flow? Payroll at Johns Creek, GA accounting and consulting firms
Accounting and consulting firms pay staff every two weeks while clients pay on their own schedule. A few habits narrow that gap:
- Split large engagements into milestone invoices
- Ask for a retainer before new work starts
- Send each invoice the day the work is delivered
- Accept card and bank transfer payments
- Schedule large purchases for the week after a big receipt
- Keep a credit line open for the gaps that remain and draw on it as each one appears
Where a gap is a one-time event, such as a new hire before the first project bills, working capital is the comparison to a line of credit.
Business funding articles on practice purchases, credit lines and second locations in Johns Creek, GA
Six articles, each worked through for one kind of Johns Creek, GA business, with invented figures computed line by line:
- Practice purchase and operatory equipment loans: buying a dental office, pricing a partner buy-in and financing chair packages
- Reformers, rowers and a new class format: equipment and launch costs for an operating fitness studio
- Pedicure chairs, nail tables and supply orders: where salon equipment ends and work on the suite begins
- A second child care center: a deposit, a passenger van and teacher payroll for a second location
- Credit lines for firms and practices: draws between client payments, renewals and the statements behind a line
- Buying a practice or agency: cash, a seller note and a term loan, plus the records to collect from the seller
By Meadowmoor Commercial Capital · Updated