The 13-week cash flow is a powerful financial tool that gives businesses short-term visibility into their cash position, helping them better manage liquidity and plan ahead.
As the name suggests, a 13-week cash flow is a weekly projection of your business’ cash inflows and outflows over a 13-week period. By analysing cash receipts and payments, it shows the expected weekly cash balance, providing a clear picture of your short-term financial health and highlighting any potential issues.
The primary purpose of a 13-week cash flow is twofold: it offers visibility into your upcoming cash position, allowing you to take pre-emptive action if cash shortfalls or surpluses arise. It also helps demonstrate financial control to external stakeholders like banks, lenders, and finance companies.
Building a 13-week cash flow
Creating this tool requires gathering key financial data:
- Cash inflows: Customer payments, interest on savings, and invoice financing.
- Cash outflows: Payroll, taxes, material purchases, overhead expenses and loan repayments.
Analysing recent bank statements (typically between 4 to 8 weeks) helps identify patterns in these cash movements. You can build the cash flow using a simple Excel spreadsheet or more sophisticated data tools, ensuring it remains flexible and up-to-date.
Maintaining and using the cash flow
For the 13-week cash flow to be effective, it needs consistent ownership, ideally managed by the most senior finance professional in your business. Reviewing and updating it each week ensures real-time visibility and timely decision-making. Sitting down regularly with your finance team also allows you to monitor cash performance and plan for growth, as well as giving you time to mitigate any issues that may arise.
Setting a minimum cash balance helps you avoid potential cash crises by giving an early warning when cash reserves dip below a safe level. This proactive approach provides room to manage temporary cash dips through overdrafts, payment plans, or expense timing adjustments.
The key benefits of a 13-week cash flow
- Liquidity management: Cash flow visibility ensures you can meet your obligations even when profits are strong but cash is tight.
- Advanced planning: By spotting potential shortfalls early, you have time to address them – whether that’s through financing options, supplier negotiations, or strategic cost-cutting.
- Early problem detection: Persistent cash flow issues may signal deeper financial challenges. Addressing them early opens up more solutions and support options.
In essence, a 13-week cash flow equips businesses with the foresight and control they need to maintain stability and drive long-term growth – it’s one of the most important tools a business can have in its arsenal. If you haven’t implemented your own 13-week cash flow yet, now is the time to start.
If you’d like to know more about creating a 13-week cash flow to better safeguard your business, watch the Merchant Healthcheck Webinar below. Or you can contact Moorgate Management’s CEO Chris Maityard on cmaityard@moorgatemanagement.com or 07767 291379 for more information.