You can be profitable on paper and still run out of cash. That’s the cash flow trap.
Building a Forecast
Start with current bank balance. Add expected inflows (AR payments, new revenue). Subtract expected outflows (rent, payroll, vendor payments, taxes). Project forward 13 weeks.
Why Weekly Is Better Than Monthly
A monthly forecast can hide dangerous gaps. If rent, payroll, and quarterly taxes all hit the same week, you’ll have a crunch even though the month looks fine.
What to Do When Cash Is Tight
Accelerate collections, delay non-essential expenses, negotiate vendor terms, tap a line of credit, and time large purchases to your cash cycle.
Making It a Habit
Updated monthly for bookkeeping clients, weekly for fractional CFO clients. The forecast becomes more accurate as you learn your business’s patterns.
Disclaimer: The information provided is for general educational purposes only and does not constitute tax, legal, or investment advice. This content is not intended or written to be used, and cannot be used, for the purpose of avoiding penalties under the Internal Revenue Code. Tax outcomes depend on your specific facts and circumstances. Viewing this material does not create a CPA-client relationship. Personalized advice is provided only through a signed engagement letter.
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