How to Prepare a Cash Flow Statement?

You've had your best month of the year. Sales are at a record high, profits are soaring. But on the 20th of the month, you don't have the money to pay salaries.

This isn't a contradiction. Profit and cash occur at different times — and businesses close down not because they aren't profitable, but because they run out of cash.

Why do profit and cash diverge?

Profit is born the moment you issue the invoice. Cash, when the money hits your account. If there's a 60-day gap, you are profitable for those 60 days, yet broke.

Four things that widen the gap:

• Sales on credit. Profit today, money two months later.
• Inventory. You paid for it, but the goods sit on the shelf; neither profit nor cash yet.
• Items that are cash outflows but not expenses. Loan principal payments, capital expenditures, tax payments.
• VAT. The VAT you collect is not your money; it will go out the following month.

In fast-growing businesses, this scissors effect is at its most dangerous: as sales increase, inventory and accounts receivable grow, while cash tightens. This is why it is possible to go bankrupt while growing.

The skeleton of the table

You don't need a complex model. Four rows are enough:

Set this up side by side for 8–13 weeks. Columns are weeks, rows are these four items. The entire table should fit on one screen; if it doesn't, you've gone into too much detail.

Why weekly?

Monthly views are misleading. Even if the money seems to suffice in the monthly total, you will find yourself in a crunch in a month where payments are concentrated on the 5th and collections on the 25th.

Weekly breakdowns reveal this pit. Daily breakdowns, however, are unnecessary detail for most small businesses and unsustainable.

Practical rhythm: 15 minutes every Monday morning. Write down last week's actuals, update the upcoming 12 weeks.

Collection forecasting: optimism is the biggest mistake

The accuracy of the table is determined in the collections row. And most businesses are not realistic here.

Don't confuse the due date with the collection date. You know how late your customers are on average — write that delay into the table. If you sell on 30-day terms and customers pay in 45 days on average, put the collection in week 45.

Even better: segment customers by payment behavior. Timely payers in a separate row, delayed payers in another. Keep the collection forecast for the second group conservative.

You should have a separate report to see due receivables; you can view this on the dashboard in Qolay.App with the Upcoming Collections and Payments report.

Forgotten payments

Items frequently missed in the payment row:

• VAT and withholding tax. Due the following month, regular and large.
• Social security premiums. Not the same month as salaries, but the following month.
• Advance corporate tax. Every three months; when forgotten, it disrupts the monthly budget.
• Annual payments. Insurance, association dues, software subscriptions, accounting fees.
• Loan principal. Not an expense, but a cash outflow — it goes into the table.

The last item is critical: a cash flow statement is not an income statement. What gets written here is not an "expense," but "money going out."

When is the table useful?

Its value lies in seeing a crunch beforehand. If your closing cash drops into the negative in week six, you have three choices today:

• Pulling collections forward — calling those with upcoming due dates, offering a cash discount.
• Delaying payments — talking to the supplier, postponing purchasing plans.
• Finding resources — loan, partner, equity.

All three are easy to do six weeks in advance, but hard to do on a Wednesday morning. The sole function of the table is to buy you that time.

Frequently asked questions

Is Excel enough?

Enough to start. The problem is manually transferring receivable and payable data every week; if your source data sits in pre-accounting, feeding the spreadsheet takes minutes.

How many weeks ahead should I look?

8–13 weeks is the right range for most small businesses. Anything longer turns into guesswork, anything shorter into a reaction.

My forecasts aren't hitting, is the table useless?

It's normal for them not to hit. As you compare actuals with forecasts every week, your forecasting power increases. The first two months are a calibration period.

How do you set it up for a seasonal business?

13 weeks isn't enough for seasonal businesses; a high-level annual view is also needed. Plan by setting aside fixed expenses in off-season months from seasonal earnings.

In summary: four rows and thirteen columns. Simplicity is not a weakness, but a reason for sustainability — a table you actually fill out every week is better than a perfect model you never fill out.

By opening a free account on Qolay.App, you can view your due receivables and payables from the dashboard and feed your cash plan with real data.

This article is for general informational purposes only. Consult your financial advisor for financing decisions and tax payment schedules.