Profitable businesses run out of cash all the time. The profit is real, but it's sitting in customers' unpaid invoices, in stock on the shelf, or it went to the ATO in a quarterly payment nobody planned for. A cash flow forecast is how you see that coming.
This guide shows you how to build one: the short-term 13-week forecast for managing the next quarter, the 12-month three-way forecast for planning the year, the assumptions that make or break both, a template you can copy, and a worked example with numbers.
What is a cash flow forecast?
A cash flow forecast is a projection of the money you expect to receive and pay, period by period, with a running bank balance at the end of each period. It answers one question: will we have enough cash, and when won't we?
It's different from a profit forecast in three ways:
| Profit (profit and loss) | Cash flow | |
|---|---|---|
| Sales | Counted when you invoice | Counted when the customer pays |
| GST | Excluded | Included: collected from customers, paid to the ATO |
| Loan repayments | Only the interest is an expense | The full repayment, interest and principal, leaves the bank |
| Equipment purchases | Spread over years as depreciation | The full price leaves the bank on the day you pay |
| Tax | An expense in the year | Paid in instalments and at assessment, often months later |
| Owner drawings or dividends | Not an expense | Cash out the door |
That's why a business can show a healthy profit and still struggle to pay its BAS.
Which cash flow forecast do you need?
| Forecast | Period | Best for | Built from |
|---|---|---|---|
| 13-week cash flow forecast | Weekly, for one quarter | Managing tight cash, payroll, supplier payments, the next BAS | Your bank balance, unpaid invoices, bills due, payroll calendar |
| 12-month cash flow forecast | Monthly, for a year | Planning seasonality, hires, purchases, tax payments | Last year's actuals plus assumptions |
| Three-way forecast | Monthly, usually 12 to 36 months | Bank loans, major decisions, investors, growth planning | Linked profit and loss, balance sheet and cash flow |
Most small businesses benefit from a 13-week forecast whenever cash is tight, and a 12-month view at least once a year before 30 June. Growing businesses, and anyone borrowing, should use a three-way forecast.
How do you do a 13-week cash flow forecast?
A 13-week forecast uses the direct method: you list actual expected receipts and payments, week by week. It's the most practical tool for a business owner, because every line is a real amount you can check against the bank.
Step by step
- Start with today's bank balance. Use the actual balance across all operating accounts. Leave out any overdraft limit; you'll show that separately.
- List expected receipts by week. Go through your unpaid invoices and put each one in the week you realistically expect it, based on how that customer actually pays, not your payment terms. Add expected new sales, and cash sales for retail or hospitality.
- List the payments you know about. Wages and super on each payday, rent, loan repayments, supplier bills by due date, subscriptions, insurance.
- Add the tax payments. BAS (GST and PAYG withholding, and PAYG instalments if you pay them) in the week they're due. Our guide to BAS due dates lists them.
- Add one-offs. Equipment, annual insurance, registrations, a bonus, owner drawings.
- Calculate the closing balance for each week: opening balance plus receipts minus payments. That becomes next week's opening balance.
- Mark the danger weeks. Any week where the closing balance drops below your safety buffer (for example, one fortnight's payroll) needs action now.
- Update weekly. Replace the past week with actuals, note why it differed, and add a new week 13.
Key point: Under Payday Super, from 1 July 2026, employers must pay super each payday, and the contribution must reach the employee's fund within 7 business days. Super is no longer a quarterly lump. Put it in the forecast in the same week as each pay run.
13-week cash flow forecast template
Copy this structure into a spreadsheet. We've shown four of the thirteen weeks; the rest follow the same pattern.
| Line | Week 1 | Week 2 | Week 3 | Week 4 | … Week 13 |
|---|---|---|---|---|---|
| Opening bank balance | |||||
| Receipts | |||||
| Customer receipts: existing invoices | |||||
| Customer receipts: new sales | |||||
| Cash and card sales | |||||
| GST refunds | |||||
| Other receipts (loans drawn, asset sales, owner funds) | |||||
| Total receipts | |||||
| Payments | |||||
| Wages (net pay) | |||||
| Super (each payday) | |||||
| Suppliers and stock | |||||
| Rent and outgoings | |||||
| Loan and lease repayments | |||||
| BAS: GST, PAYG withholding, PAYG instalments | |||||
| Payroll tax (if registered) | |||||
| Insurance, subscriptions, registrations | |||||
| Equipment and other one-offs | |||||
| Owner drawings or dividends | |||||
| Total payments | |||||
| Net cash flow for the week | |||||
| Closing bank balance | |||||
| Safety buffer | |||||
| Headroom (closing balance less buffer) | |||||
| Overdraft or facility available |
Two habits make it work: one row per real payment source (don't lump everything into "expenses"), and a short note column explaining every big number.
How do you build a three-way forecast?
A three-way forecast links three statements so each one checks the others:
- Profit and loss: revenue, cost of sales, expenses, depreciation, interest and tax.
- Balance sheet: cash, debtors, stock, equipment, creditors, GST and tax owed, loans and equity.
- Cash flow statement: how the cash balance moved: operating, investing and financing.
Because the statements are linked, the balance sheet must balance every month, and the closing cash on the balance sheet must equal the closing cash on the cash flow statement. If they don't, something's wrong in the model. That built-in check is why lenders and investors trust three-way forecasts more than a cash-only spreadsheet.
How the numbers connect
| Driver | Profit and loss effect | Balance sheet effect | Cash effect |
|---|---|---|---|
| Sales grow | Revenue up | Debtors up (customers owe more) | Cash arrives later, by your debtor days |
| Customers pay slower | No change | Debtors up | Cash down |
| Buy more stock | No change until sold | Stock up | Cash down when you pay |
| Pay suppliers later | No change | Creditors up | Cash up, for now |
| Buy equipment | Depreciation over its life | Fixed assets up | Cash down in the month you pay |
| Take a loan | Interest expense | Loan up | Cash up when drawn, down with each repayment |
| Pay a dividend or drawings | No change | Equity down | Cash down |
Our cash flow forecast agent builds a monthly three-way forecast from at least two years of your actual figures, with the balance sheet checked to balance every month. Your accountant reviews every assumption with you before it's relied on.
What assumptions go into a cash flow forecast?
A forecast is only as good as its assumptions. These are the seven that matter, and where we see them go wrong.
| Assumption | What to decide | Common mistake |
|---|---|---|
| Revenue | Growth, price rises, seasonality, new or lost contracts | Assuming growth far above anything in your history |
| Gross margin | Cost of sales as a percentage of revenue | Improving margin with no change in pricing or suppliers |
| Overheads | Inflation, wage increases, new hires and when they start | Forgetting super, payroll tax and on-costs for new staff |
| Debtor days | How long customers actually take to pay | Using your terms (say 14 days) instead of reality (say 45) |
| Creditor days and stock | How long you take to pay; how much stock you hold | Assuming you can stretch suppliers indefinitely |
| Capital spending | Equipment, fit-outs, vehicles, and when | Forgetting replacement equipment and annual renewals |
| Tax and financing | Company tax, PAYG instalments, loan terms, drawings | Leaving out the tax bill on this year's profit, payable next year |
Write each assumption down in plain English next to the forecast: "Sales grow 8% a year, in line with the last three years." "Debtors take 40 days, the average for the last six months." If you can't explain an assumption in one sentence, it's probably a guess.
Build a downside case
Copy the forecast and change two things: revenue 15% lower and customers paying two weeks later. If the downside case runs out of cash, you've found out cheaply. Then decide what you'd do: a facility arranged in advance, a hiring pause, tighter debtor follow-up.
Worked example: a 13-week forecast that finds a gap
Hypothetical, rounded figures, including GST.
A small trades business has $40,000 in the bank at the start of October. It pays $18,000 of net wages every fortnight (the PAYG withheld from them is paid later with the BAS), and under Payday Super about $2,200 of super with each pay run. Rent is $4,000 a month. The September quarter BAS is due in late October: $26,000 of GST and PAYG withholding. Customers owe $85,000 and historically pay in about 45 days, so most of that arrives in November.
| Week | Opening | Receipts | Payments | Closing |
|---|---|---|---|---|
| 1 | $40,000 | $12,000 | $24,200 (pay run, super, rent) | $27,800 |
| 2 | $27,800 | $14,000 | $6,000 (suppliers) | $35,800 |
| 3 | $35,800 | $10,000 | $20,200 (pay run, super) | $25,600 |
| 4 | $25,600 | $11,000 | $32,000 (BAS, suppliers) | $4,600 |
| 5 | $4,600 | $22,000 | $24,200 (pay run, super, rent) | $2,400 |
| 6 | $2,400 | $28,000 | $5,000 (suppliers) | $25,400 |
The business is profitable, but weeks 4 and 5 run below a one-fortnight payroll buffer of about $20,000, and week 5 nearly runs out. Seeing this in week 1 gives it three weeks to act. Options include chasing the two largest debtors now, asking two big customers for a progress payment, arranging a short-term facility before it's needed, or (if paying in full isn't possible) talking to the ATO about the BAS before the due date rather than after. Our guide to ATO payment plans explains how that works.
Watch out: Never fund a cash gap by holding back PAYG withholding or super. Those amounts can become personal liabilities for company directors under the director penalty regime. See our guide to director penalty notices.
Mistakes we see in cash flow forecasts
- Forecasting profit and calling it cash. No GST, no loan principal, no tax payments.
- Using payment terms instead of payment behaviour. Your terms say 14 days; your customers say 45.
- Forgetting the annual and quarterly items: insurance, registrations, BAS, income tax, and the PAYG instalment uplift after a good year.
- Leaving out the owners. Drawings and dividends are real cash out.
- Building it once and never updating it. A stale forecast is worse than none, because it gives false comfort.
- No downside case. Every forecast is wrong; the question is by how much.
- Treating super as quarterly. From 1 July 2026 it's paid each payday.
- Ignoring payroll tax as you grow past your state's threshold. See our guide to payroll tax by state.
Can Xero do a cash flow forecast?
Partly. Xero's higher plans include short-term cash flow projections, based on the invoices and bills already in your file. They're handy for the next few weeks. What they can't do is model things that aren't in the file yet: a new hire, a lost customer, a loan, the BAS on sales you haven't invoiced, or next year's tax. For those you need a forecast built on assumptions, in a spreadsheet or a forecasting tool, ideally linked to your Xero data. If you're still choosing software, our Xero vs MYOB guide compares what each offers.
How BPAG helps with cash flow forecasting
Cash flow is part of how we work with every business client: we keep books updated daily in Xero, review cash flow, and flag issues early. For businesses that want more, our cash flow and profit optimisation service builds and maintains forecasts, and our fractional CFO service includes strategic cash flow forecasting with a monthly strategy meeting.
Our management report agent turns your Xero numbers into monthly ratios, trends and actions, and our cash flow forecast agent builds the three-way model. A qualified accountant reviews every forecast and every assumption with you. The forecast is a tool for decisions, so the conversation about it matters as much as the spreadsheet.
"We have been with BPAG for almost a year now and have felt significant improvement with the business, our own knowledge and motivation… BPAG are by far the best." Veronica Thomas, Google review
Frequently asked questions
What's the difference between a cash flow forecast and a budget?
A budget sets targets for income and expenses, usually on a profit basis. A cash flow forecast predicts when money actually moves through the bank, including things a budget can miss, such as GST, loan principal, tax instalments and customers paying late. Most businesses need both, and a three-way forecast links them.
How often should I update my cash flow forecast?
Update a 13-week forecast weekly: replace last week's forecast with actuals and add a new week at the end. Review a 12-month forecast monthly, or whenever something material changes, such as losing a customer or signing a lease. A forecast you don't update stops being useful within a month.
Can Xero do a cash flow forecast?
Xero's higher plans include short-term cash flow projections based on invoices and bills already in the file. They're useful for the next few weeks but only know about what's been entered. For anything beyond that, or to model decisions such as a hire or a loan, you need a forecast built on assumptions.
Do I need a cash flow forecast for a bank loan?
Lenders usually ask for one for business lending, particularly for new businesses, larger loans or when trading has been uneven. They'll want to see that repayments are covered with room to spare. A three-way forecast is more convincing than a cash-only one because the balance sheet shows the loan, the repayments and the effect on your position.
Should I forecast including or excluding GST?
For a cash flow forecast, include GST, because the cash you receive from customers includes it and the cash you pay to the ATO is a separate outflow. Profit forecasts are prepared excluding GST. Mixing the two is one of the most common forecasting errors.
Official sources
General information only, current as at 18 October 2026. It is not personal tax, legal or financial product advice and doesn't take your circumstances into account. Talk to us before you act. Where a recommendation needs a licensed financial adviser or a solicitor, we work alongside them.