Chapter 11 Resources

From Looking Backward to Looking Ahead

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Key Concept

A P&L tells you where you were. A forecast tells you where you’re going. Only one helps you steer.

Forward-Looking Finance: Not predicting the future perfectly, but being prepared for likely scenarios.

Figures (Full Resolution)

Figure 11.1: 13-Week Cash Flow Forecast

13-Week Cash Flow A visual 13-week cash flow forecast showing weekly cash position. Notice Week 5 flagged LOW—this early warning lets you take action before cash actually runs short.

Downloadable Resources

Forecasting Tools

The Rear-View Mirror Problem

Most business owners run their company looking backwards:

Question Backward View Forward View
Cash “We ran out last month. What happened?” “Cash will be tight in 6 weeks. Let’s address it now.”
Revenue “Revenue was down. Why?” “This client’s payments are slowing. Red flag.”
Expenses “We overspent on…” “At current rate, we’ll exceed budget by…”
Opportunities “We couldn’t take that project.” “We have runway for that investment.”

Why Small Businesses Don’t Forecast (And Why They Should)

Common Objections

“We’re too small.” > You’re exactly the right size. Small businesses have less margin for error—surprises hit harder. A $50,000 unexpected expense is annoying for a $50M company. It’s catastrophic for a $2M company.

“It takes too much time.” > Traditional forecasting, yes. AI-assisted? What used to require a dedicated FP&A analyst can now be automated from existing data.

“Forecasts are always wrong.” > They’re meant to surface trends and scenarios. Directionally right is infinitely better than surprised. The question isn’t “will this forecast be exactly right?” It’s “will I see problems coming?”

The 13-Week Cash Flow Forecast

Start here. Not a full annual budget. Just 13 weeks of visibility.

Sample Forecast

Week Beginning Inflows Outflows Net Ending Cash Status
Dec 16 $65,500 $45,200 $38,400 +$6,800 $72,300 OK
Dec 23 $72,300 $28,100 $52,100 -$24,000 $48,300 Payroll
Dec 30 $48,300 $31,500 $29,200 +$2,300 $50,600 OK
Jan 6 $50,600 $47,800 $41,200 +$6,600 $57,200 OK
Jan 13 $57,200 $38,900 $67,400 -$28,500 $28,700 ⚠️ LOW
Jan 20 $28,700 $52,100 $38,800 +$13,300 $42,000 Recovery

Alert: Week of Jan 13 cash drops to $28,700 (below $35K threshold).

Action Options: – Accelerate $18K receivable collection – Delay non-essential vendor payment – Draw on credit line – Negotiate quarterly tax payment plan

The 30-Minute Weekly Forecast

A spreadsheet works fine when your business model is straightforward. Here’s the weekly discipline:

Five Questions (30 minutes)

  1. What’s in the bank today?
    • Pull actual balance from bank portal
    • Compare to QBO (should match if reconciled)
  2. What’s definitely coming in this week?
    • Review AR aging for current invoices
    • Check any expected deposits
  3. What’s definitely going out?
    • Scheduled payments
    • Payroll dates
    • Recurring expenses
  4. Where does that leave us?
    • Calculate ending cash
    • Compare to minimum threshold
  5. Any surprises compared to last week?
    • What changed?
    • Why?

Pro Tip: Make sure your QBO cash balance matches your actual bank balance. If they differ, you have unreconciled transactions—find them before making cash decisions.

When to Upgrade to AI-Assisted Forecasting

Situation Manual OK AI Recommended
Transaction volume <100/month >100/month
Revenue streams 1-2 predictable 3+ variable
Cash patterns Steady Seasonal/variable
Scenario needs Occasional Regular
Staff bandwidth Available Limited

Scenario Planning Framework

The real power is “what if” analysis:

Scenario 1: Lose Biggest Client

Impact Amount Implication
Revenue loss -$15K/month Immediate cash impact
Cash runway 4 months At current expenses
Action needed Reduce $8K/month OR replace revenue Before runway expires

Scenario 2: Hire New Team Member

Factor Amount Implication
Cost (fully loaded) $6,500/month Salary + benefits + taxes
Break-even revenue $7,800/month Must generate more than cost
Cash runway impact -6 weeks Reduced cushion

Scenario 3: Vendor Price Increase

Factor Amount Implication
Category impact +$470/year Based on 20% increase
Budget variance Minor Within tolerance
Action needed None Monitor only

Case Study: The $47,000 Warning

Client: Commercial cleaning company, 35 employees, $2.1M revenue

Situation: Growing fast—just landed two new contracts, hiring to meet demand.

What the Forecast Revealed

Week 1:  $68,400 (current)
Week 6:  $31,200 (equipment payment + payroll)
Week 8:  $12,800 ⚠️ Below $25K threshold
Week 10: -$4,600 ⚠️ NEGATIVE CASH

The Hidden Trap

New contracts were 45-day payment terms. They’d pay employees for 6+ weeks before receiving payment. Without the forecast, they’d have discovered this at Week 8—too late.

Early Warning Actions (Taken Week 1)

Action Impact
Negotiated 30-day terms with one client Accelerated $23K cash timing
Secured $50K credit line (while cash strong) Safety net in place
Delayed equipment purchase 60 days Preserved $18K cash
Accelerated collection on $28K receivables Improved Week 6-8 position

Result

  • Minimum cash stayed at $31K
  • No crisis
  • Owner slept through the night

Without forecasting: Emergency scramble, possibly missing payroll, damaged vendor relationships, punitive borrowing terms.

Owner: “We thought we were doing great. We were 8 weeks from catastrophe.”

The Windshield View

When you operate with forward visibility:

Aspect Backward (Rear-View) Forward (Windshield)
Cash crunches Reacted to Anticipated
Opportunities Scrambled for Evaluated financially
Decisions Reactive Proactive
Confidence Uncertain High

This is what Tax Ready books enable. Clean data feeds accurate forecasts. Accurate forecasts enable better decisions.

Key Takeaways

  1. Most businesses operate looking backward; forward finance is achievable
  2. Simple forecasting (weekly cash checks) works for many—don’t over-engineer
  3. AI makes forecasting practical when complexity exceeds manual methods
  4. Start with 13-week cash-flow forecast—minimum viable windshield
  5. Clean books are the prerequisite—garbage in, garbage out

Your Next Step

Set up a simple 13-week cash flow forecast. Even a basic spreadsheet with this week’s cash plus expected inflows minus expected outflows gives you visibility you don’t have today.

Want help with forecasting? Apply for a complimentary Tax Ready Assessment – we’ll show you how clean books connect to forward visibility.

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