Every year, perfectly profitable businesses run out of money. Nobody did anything wrong. They just confused making money with having it.
Profit is what your income statement says you earned. Cash is what's in the account on Thursday, when payroll clears. The distance between the two is where owners start checking the bank app at red lights.
Why the forecast you have doesn't work
If you have one, it probably assumes customers pay when you invoice them. They do not. It also forgot the insurance renewal, the quarterly tax payment, and the annual software bill that arrives every year with the confidence of a surprise.
Build a better one this weekend
It takes about an hour, a spreadsheet, and a willingness to be honest with the spreadsheet.
Step one. Make 13 columns, one for each of the next 13 weeks.
Step two. For money coming in, use the week customers actually pay, not the week you bill them. If a client has paid in 45 days for three years running, believe them.
Step three. For money going out, list all of it. Payroll, rent, loans, taxes, and every bill that only appears once a quarter or once a year.
Step four. Find your lowest week. That's the one to plan around.
What you'll find
Most owners find one uncomfortable week, usually three or four out. Congratulations. You found it on a quiet Tuesday instead of the morning it arrives.
“They just confused making money with having it.”
The catch
A forecast only works if someone updates it every week, with real numbers, and notices when something drifts. The first one is oddly calming. Around week six, most people start to wonder whose job this actually is.
Partner · Margin & Mark
