Illustrative example · not a client case study
A profitable month can still leave cash short.
This fictional trades business shows the questions a cash forecast can answer. The figures are illustrative Canadian dollars, not client results, a promised saving or an example of a guaranteed engagement deliverable.
Illustrative numbers
The timing problem.
Assume an incorporated trades business starts a four-week period with $30,000 in its bank account. It expects $60,000 from customers and $95,000 of payments for payroll, materials, subcontractors, overhead and tax.
| Cash movement | Amount |
|---|---|
| Opening bank cash | $30,000 |
| Expected customer receipts | +$60,000 |
| Expected payments | −$95,000 |
| Projected closing cash | −$5,000 |
The arithmetic is $30,000 + $60,000 − $95,000 = −$5,000. A profitable set of accounts does not remove that cash gap. Invoices can remain unpaid while wages and suppliers need paying.
Use the forecast
The decisions to test before committing.
- Which customer receipts are supported by agreed payment dates?
- What happens if a $20,000 receipt arrives two weeks later?
- Which payments are fixed, and which purchases can be timed differently without breaching commitments?
- What would a new hire or another job do to the lowest cash balance?
A four-week total can still hide a shortfall halfway through the period. A useful forecast places receipts and payments in the weeks they are expected and tests uncertain assumptions. If that delay pushes a $20,000 receipt beyond the forecast period, the four-week closing balance would fall to −$25,000 if every other assumption stayed the same.
Next step
The records behind a useful forecast.
Start with reconciled accounts, amounts customers owe, supplier bills, payroll dates, tax payment dates and committed work. Assumptions need updating as actual receipts and payments arrive.
Fractional CFO support can include forecasting and management reporting within an agreed scope. Bookkeeping and any cleanup are separate pieces of the work. Discuss the decision you need to make before choosing the reporting.
Next step
Book a call.
Fifteen or twenty minutes, no charge. You describe the situation, David tells you whether he can help and what it would cost.
info@dsjmaccounting.com