See February
in October.

Profit is not cash, and cash is what closes businesses

A profitable business fails when the money owed to it arrives later than the money it owes. That gap is invisible in a profit and loss account and obvious in a cashflow forecast.

It is the single most common way an otherwise healthy small business gets into trouble, and it is almost always foreseeable weeks ahead.

What the forecast is built from

• —Invoices raised and when they are actually due, not when you hope they will be paid.
• —How your customers actually pay — a client who always takes 60 days is modelled as 60 days.
• —Bills and recurring costs already scheduled.
• —Tax set aside: VAT, PAYE and Self Assessment payments on account.
• —Seasonality visible in your own history rather than a generic assumption.

What to do when it shows a gap

• —Chase earlier. Most gaps close with money already owed to you rather than new work.
• —Move a discretionary purchase by a month. A van bought in the wrong month is a cash problem, not a profit one.
• —Sell into the gap now — autumn work fills a February hole, February does not.
• —Talk to your accountant before it arrives. Time to Pay arrangements are far easier to agree in advance than in arrears.