How to build a 13-week cash flow forecast, step by step

A 13-week cash flow forecast is a weekly, direct-method forecast of the next quarter: for each week it lists the cash expected to come in, the cash expected to go out, and the bank balance left at the end of the week. It answers one question: will the company have enough cash every week, and if not, which week is the problem.

It is written for founders and finance leads of software companies, and every step mirrors Decipher's free template, so it helps to open it alongside: get the 13-week cash flow forecast template, or see what is in the template first.

What a 13-week cash flow forecast is

Three choices define a 13 week cash flow projection, and they are what separate 13-week cash forecasting from a monthly model.

Why 13 weeks

Thirteen weeks is one quarter: long enough to see a payroll cycle, a rent cycle, quarterly taxes and most receivables already on the books, and short enough that almost every number ties to an invoice, a pay date or a contract. Beyond a quarter, the forecast becomes a plan. That longer view belongs in a monthly model, which the rolling forecast covers.

Why weekly

Monthly figures hide the low point. A company can end every month above its minimum cash and still dip below it on the Friday before a large customer pays. Weekly granularity shows the dip and the week it happens.

Direct method, not indirect

The indirect method starts from net income and adjusts for non-cash items and working capital, which explains the past well but blurs timing. A 13-week forecast uses the direct method instead, listing each receipt and disbursement in the week the money actually moves; the trade-offs between the two are covered in cash flow forecasting.

This article is about the weekly mechanics. For how to turn cash into a burn rate and a runway figure, see burn rate, burn multiple and runway.

When a company needs one

A few situations make a weekly cash view close to essential:

• Preparing to raise. Investors want to know the company will not run short before the round closes.
• Tight runway. When the cushion over minimum cash is thin, monthly is too coarse.
• Lumpy collections. Software companies that bill annually in advance get large receipts in a few weeks and steady costs in every week.
• Lender covenants. A loan with a minimum cash requirement turns a dip below that level into a default, not just a bad week. See venture debt for how those covenants work.
• Turnarounds. When cash is the constraint, every payment decision is a weekly one.

How to build a 13 week cash flow model, step by step

The template has three tabs: Read me, Invoices, and 13-Week Forecast. All figures are in thousands of dollars. Inputs are blue on cream; everything in black is a formula.

Step 1: Set the three settings

On the forecast tab, enter:

1. Week 1 ending (Friday). Weeks run Saturday to Friday and are labeled by the Friday close.
2. Opening cash. The bank balance at the start of week 1, which is the prior Friday's close.
3. Minimum cash you will accept. A board-set floor, a lender's minimum balance, or the level at which the founder would start cutting. It drives the flag row.

Step 2: Build scheduled receipts from open invoices

On the Invoices tab, list everything billed and not yet collected: customer, amount and due date. Then set one assumption, typical days late, which is added to every due date. If a customer has confirmed a specific pay date, enter it and it overrides the assumption.

Each invoice then lands in the forecast in the week its expected pay date falls. Invoices that land after week 13 are listed but not counted. This is the core of an honest forecast: receipts tied to named invoices and realistic pay dates, not a monthly revenue figure divided by four.

Step 3: Add unscheduled receipts and financing

Some cash will arrive that cannot be named yet: new sales, renewals not yet invoiced, monthly card payments. Those go in the Unscheduled and new sales row, week by week. Interest and refunds go in Other receipts.

Financing, meaning equity or debt proceeds, goes on its own line. Keeping it separate shows whether the business covers its own costs and how much depends on money not yet raised.

Step 4: Enter disbursements in the week the money leaves

List each outflow in the week it clears the bank:

• Payroll on pay dates. The template's sample pays every other Friday.
• Benefits and payroll taxes on their own schedule.
• Commissions in the week they are paid, not earned.
• Rent and office, usually on the first.
• Vendors: hosting, software, marketing programs, contractors and professional fees, on their payment terms.
• Insurance when premiums are due.
• Taxes on the due date.
• Debt service and capital purchases when scheduled.

Payroll is usually the largest and most predictable line, so get its dates exactly right first. Planned hires and departures should follow the headcount plan.

Step 5: Read ending cash and the flag

The forecast calculates net cash flow and ending cash for each week, plus the cushion over minimum. The flag row reads Watch when ending cash is less than 125% of the minimum and BELOW MIN when it is under the minimum. The At a glance box and chart show the lowest ending cash in the 13 weeks, the week it happens, and weeks of runway at the average burn.

Look at the lowest week, not the last one. The low point is where the trouble is.

A worked example

The template's sample is an illustrative software company with $7.0M of cash, $5.0M of annual recurring revenue and 40 people, billing customers annually in advance. Its board has set a $6.5M cash floor. Here are its first four weeks, as first built, with the smaller disbursement lines grouped.

Illustrative figures, not client data.

Carry the same pattern through the quarter and the shape becomes clear.

Illustrative figures, not client data.

The $7.0M starting balance is less than 25% above the $6.5M floor, so the sample shows Watch from week 1 through week 8. January ends only $168K below where it started, yet the company trips its floor in week 9 and reaches its low point of $6,260K in week 13. Over the quarter, receipts total $1,684K against $2,424K of disbursements.

Run the downside case

A base case alone answers the wrong question. The useful question is how bad it gets if customers pay late. The template has two scenario settings:

• Collections slip (weeks) pushes every invoice's expected pay date out by that many weeks, including confirmed dates.
• Haircut on unscheduled receipts reduces the unscheduled row by a percentage, for when new sales come in light.

In the sample, a two-week slip moves the first BELOW MIN week from week 9 to week 5, and drops the week 13 low to $6,040K, because $220K of invoices now land after the quarter ends. Adding a 20% haircut on unscheduled receipts takes the low to $5,924K. Illustrative figures, not client data.

A board will ask about slipping collections, so run it first, then decide which receipt could be pulled forward or which payment could move to clear the flag.

The Monday routine

The forecast is only useful if it is current, so it gets a short update every Monday:

1. Enter last week's actual bank balance in the actuals row. The forecast re-bases from it automatically. The downloadable sample already has week 1's actual entered, so its balances run $12K above the tables here.
2. Compare actual to forecast. The Actual vs forecast row shows the difference.
3. Fix the assumption, not the number. An unexplained miss usually means a timing assumption is wrong, most often typical days late. Change that assumption rather than overwriting a cell to make the total look right.
4. Roll forward. Drop the completed week and add a new week 13.
5. Check the low point and the flag again.

The monthly tie-out to the budget

Once a month, compare the weekly forecast with the monthly budget. The template's tie-out section sums receipts and disbursements for the weeks ending in each month and compares the net with budgeted net burn. A week that straddles two months counts in the month it ends.

In the sample, January's four weeks show $533K of receipts and $701K of disbursements, a net of $(168)K against a budgeted $(175)K: a $7K gap. Illustrative figures, not client data. A gap means timing, a missed item, or a budget that needs a look; compare only complete months, since partial months at either end will not tie. For the monthly side of this, see budget vs actual.

Common mistakes

Two mistakes the steps above do not fully prevent:

• Averaging payroll across weeks. Payroll leaves on pay dates. Spreading it smooths away the low points.
• Building it once. A forecast that is not re-based weekly drifts within a month.

How an investor or lender reads your 13-week forecast

Decipher sets up a company's finance the way an investor or acquirer will read it. On a 13-week cash flow, readers tend to check the same things:

• The low point and the week. The lowest ending cash, and how close it sits to the minimum.
• How receipts were built. Named invoices with realistic pay dates carry weight. A flat weekly revenue number does not.
• Whether financing is separate, so the business can be seen without money not yet received.
• A downside case. A forecast with no slip or haircut scenario will be stress-tested by the reader, often more harshly.
• The track record. Past weeks of forecast against actual show whether the forecasts can be trusted; explained and corrected misses build credibility.
• A tie to the monthly numbers, since weeks that do not add up to the budget mean something is missing.

For a lender, the minimum cash line is often a covenant, so set the minimum at the covenant level and show the flag clear in the downside case.

What the template does not do

The template will not tell a company what to cut, when to raise, or whether the plan behind the numbers is sound. It also stops short of line-by-line variance, headcount-driven payroll, debt and covenant tracking, and a roll-forward that needs no cutting and pasting, which is what a finance lead would build next.

If the flag trips and the fix is not obvious, Decipher builds and runs 13-week cash flow forecasts as part of its fractional CFO services, alongside the budget, monthly reporting and board materials. To start alone, get the 13-week cash flow forecast template; it includes the sample company, so the mechanics can be seen before any real numbers go in.