More businesses fail due to cash flow problems than due to lack of profitability. You can be running a genuinely profitable business and still find yourself unable to make payroll — if your timing is wrong, your invoicing is slow, or your growth is consuming cash faster than your model anticipated.
Why cash flow and profit are different things
Your P&L tells you whether you made money. Your cash flow tells you whether you have money. The gap between the two is where most business owners get caught out.
Common reasons the two diverge:
- Late payments — You've invoiced £100k but only collected £60k
- Growth — You're spending money now to generate revenue later
- Seasonality — Revenue bunches in certain months; costs are spread evenly
- VAT and PAYE — Tax liabilities that arrive quarterly but should be provisioned monthly
- Large one-off costs — Equipment, deposits, refurbishments
The 13-week rolling cash flow forecast
The most practical tool for managing cash is a 13-week rolling forecast. It's short enough to be accurate, long enough to give you enough lead time to act.
At its core, it's a simple model: opening cash balance, plus expected receipts, minus expected payments, equals closing balance — week by week. The discipline is updating it weekly with actuals and rolling it forward.
"A 13-week cash flow forecast doesn't need to be complicated. It needs to be honest and it needs to be updated. That's it."
Practical actions to improve cash flow
On the inflows side
- Invoice immediately on completion — not at month-end
- Tighten payment terms (30 days is a starting point, not a target)
- Use direct debit for recurring revenue where possible
- Chase overdue invoices systematically, not apologetically
On the outflows side
- Negotiate payment terms with suppliers — 45 or 60 days is often achievable
- Use credit cards strategically for large purchases (buys you 30–55 days interest-free)
- Time VAT payments — pay on the last possible day, not when the bill arrives
- Review subscriptions and recurring costs quarterly
When to seek external funding
If your 13-week forecast shows a cash trough, the time to address it is now — not when the trough arrives. Options include invoice finance, revolving credit facilities, or CBILS successor schemes. Each has its place and each has a cost. We help clients model these options and approach lenders with properly prepared financial information.
If you'd like help building a cash flow model for your business, get in touch. It's one of the most high-value things we do with clients in the early stages of working together.
