Why forecast cash rather than profit?
Profit and cash are different. A business can be profitable and still run out of money, because:
- customers pay weeks or months after the sale
- stock is paid for before it is sold
- GST, PAYE and provisional tax fall due on fixed dates
- loan principal repayments do not appear in the profit and loss
- capital purchases hit cash immediately but are depreciated over years
A cash flow forecast captures all of this. For established SMEs, the 13-week rolling forecast is the most practical format.
The structure
Set up a spreadsheet with 13 weekly columns and these rows:
Opening bank balance
Receipts
- Customer receipts (from debtors)
- Cash sales
- GST refunds
- Other income
- Loan drawdowns
Payments
- Suppliers and stock
- Wages and salaries (net)
- PAYE and KiwiSaver deductions
- GST payments
- Provisional or terminal tax
- Rent and outgoings
- Utilities, insurance, subscriptions
- Loan repayments (principal and interest)
- Capital purchases
- Owner’s drawings
Net cash flow (receipts − payments)
Closing bank balance (opening + net cash flow)
Available facility headroom (if you have an overdraft or line of credit)
Step-by-step
1. Start with the bank balance
Use today’s actual balance. Everything flows from this.
2. Forecast receipts from debtors realistically
Take your aged debtors report and assign each invoice to the week you realistically expect payment, based on the customer’s history. If a customer always pays on the 20th of the following month, forecast it then. Xero data for the June 2026 quarter showed NZ small businesses were paid an average of 4.7 days after the due date, so build in some slippage.
For future sales, apply your normal collection pattern. For example, 30% paid within the month, 60% the following month, 10% later.
3. Map fixed payments to real dates
- Wages: weekly or fortnightly pay days.
- PAYE: due on the 20th of the following month for most employers, or twice monthly for larger employers.
- GST: due on the 28th of the month after the end of the GST period, with some exceptions.
- Rent: usually monthly in advance.
- Loan repayments: as per your agreements.
Check dates with your accountant or the IRD website; getting them right is the point of the exercise.
4. Add variable and one-off payments
Supplier payments, stock orders, equipment purchases, insurance renewals and annual subscriptions. One-off items are what catch owners out.
5. Find the low point
The lowest closing balance across the 13 weeks is the number that matters. If it goes below zero, or below your comfort level, you have time to act: chase debtors, delay discretionary spending, negotiate with suppliers or arrange funding.
A worked example
Illustrative figures only. An Auckland distributor’s first six weeks:
| Week | 1 | 2 | 3 | 4 | 5 | 6 |
|---|---|---|---|---|---|---|
| Opening | 85,000 | 62,000 | 71,000 | 18,000 | 29,000 | 11,000 |
| Receipts | 48,000 | 72,000 | 55,000 | 90,000 | 50,000 | 95,000 |
| Suppliers | −30,000 | −25,000 | −45,000 | −40,000 | −28,000 | −30,000 |
| Wages (net) | −24,000 | −24,000 | −24,000 | −24,000 | −24,000 | −24,000 |
| PAYE | — | — | −21,000 | — | — | — |
| GST | — | — | — | — | — | −38,000 |
| Rent and other | −17,000 | −14,000 | −18,000 | −15,000 | −16,000 | −14,000 |
| Closing | 62,000 | 71,000 | 18,000 | 29,000 | 11,000 | 0 |
The business is profitable, but week 6 hits zero when GST falls due. Seeing this six weeks in advance gives time to chase two large overdue accounts, move a stock order and, if needed, arrange a working capital facility before the pressure arrives.
Keep it rolling
Every week:
- Replace the forecast for the week just gone with actual figures.
- Note where forecast and actual differed, and why.
- Add a new week 13.
- Review the low point and any actions needed.
Over time, accuracy improves and the forecast becomes one of your most valuable management tools.
How lenders use your forecast
For a funding request, a forecast shows:
- how much you need (the size of the gap)
- when you need it (the week the low point hits)
- how it will be repaid (when cash recovers)
Pair it with management accounts and it tells a clear, credible story. For seasonal businesses, extend the forecast to cover the full cycle; see seasonal stock funding. For contracts, see our guide to planning the cash before a big contract.
Common mistakes
- Forecasting receipts at stated terms instead of actual payment behaviour
- Forgetting GST, PAYE or provisional tax
- Leaving out loan principal repayments
- Ignoring owner’s drawings
- Building the forecast once and never updating it
A forecast that is updated every week, even roughly, is worth far more than a detailed one built once and filed away.
Quick answers
Why 13 weeks?
Thirteen weeks is one quarter. It is long enough to show GST cycles, payroll patterns and most payment terms, but short enough to forecast with reasonable accuracy.
What software should I use?
A spreadsheet works well. Many accounting platforms, including Xero and MYOB, offer cash flow tools or add-ons, but the thinking matters more than the tool.
Should the forecast include GST?
Yes. Cash flow forecasts should show amounts including GST where cash actually includes it, and show GST payments to Inland Revenue on their due dates.
Do lenders ask for cash flow forecasts?
For larger or more complex requests, often yes. Even when not required, a forecast shows you understand your business and strengthens your application.