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Why a 13-Week Cash Flow Forecast Is Essential

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Last editedNov 20222 min read

Cash flow forecasting is a useful technique for strategic budgeting. It’s helpful for making decisions regarding new investment and development based on realistic cash flows. There’s a great deal of flexibility when it comes to cash flow forecasts, with some businesses opting to focus on the short term and others on the long-term vision. The 13-week cash flow forecast offers a happy medium between the two. Here’s why it’s so beneficial.

What is a 13-week cash flow model?

A 13-week cash flow model forecasts your business weekly cash inflows and outflows over a period of 13 weeks. To do this, it subtracts cash disbursements (or outflows) from cash receipts (or inflows). It’s often requested by stakeholders when a company enters a period of economic difficulty, to show how well the business is handling its cash flow needs in the short to medium term.

What is a 13-week cash flow forecast used for?

As mentioned above, a 13-week cash flow forecast is used as a measure of financial health for investors and other stakeholders. It’s used to help a cash-strapped company obtain financing by proving that they have cash coming in with a credible forecast.

However, it’s also a useful tool for internal financial planning. Senior management will ask for a 13-week cash flow model as part of quarterly financial planning sessions. Generally, the 13-week cash flow is best used for a company’s medium-term liquidity planning. In the short-term, you’re better off using a 10-day model, while long-term planning requires a six-month or twelve-month forecast.

The advantages of a 13-week cash flow model

Why is this type of cash flow forecast so essential for businesses? With its versatile medium-term viewpoint, the forecast provides insight into your near future. It’s short enough to be accurate based on historical data but gives a longer-term viewpoint than weekly forecasting can provide. This is useful for managers who want to strategize loan repayments, debt repayments, and upcoming investment plans.

This type of model might span a total period of 13 weeks, but it usually goes into greater detail for each of the weeks so you can zoom in on where your business will be positioned two, three, or ten weeks from now.

13-week cash flow example

Once you’ve determined that the 13-week timeframe makes sense, the next step is to gather information for your cash flow forecast. The specific details will depend on your industry, stakeholders, and the purpose of the model. However, any 13-week cash flow example starts with gathering data using historic sales data and expenses as a guide. Typical data sources for cash flow forecasting include:

  • Enterprise resource planning systems

  • Bank accounts

  • General ledgers

  • Annual budgets

  • CRM tools

You’ll need to project your sales income for the following 13 weeks using this historic data, then estimate additional cash inflows such as tax refunds, interest payments, royalties, or others.

The next step is to calculate estimated expenses over the 13 weeks to come, considering your weekly and monthly bills as well as typical operating costs. This should include payments sent to suppliers as well as wages, investments, and asset maintenance.

To pull together your 13-week cash flow forecast, you must subtract the outflows from the inflows, breaking it down into detail for each of the 13 weeks. This will show you the cash you have to work with.

Automating the 13-week cash flow model

You can go through the cash flow forecasting process manually in a couple of hours using 13-week cash flow templates found online. Basic tools like Excel are useful. However, any manual forecasting leaves room for human error. Cash flow and accounting software makes it easy to automate your process, drawing data directly from built-in financial reports to produce more accurate cash flow forecasts.

GoCardless teams with over 350 partners, including top accounting software like Xero and more to join your finances and accounting books. A joined-up workflow means you can create more accurate, automated cash flow forecasts for 13-week increments and beyond. It saves time and money, while improving cash flow and streamlining the payments process.

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