Your Bank Balance Isn't the Same as the Cash You Can Spend

Monday morning. You open the banking app and see £30,000. It's a good feeling — and for a moment the week looks comfortable.

Now look at the rest of the month:

• £8,000 of payroll due next week
• £5,000 set aside — or not yet set aside — for VAT
• £7,000 of supplier invoices reaching their due dates
• Rent on the 1st
• An annual insurance payment that lands this month
• And a large customer who has been paying about ten days late recently

That £30,000 hasn't changed. What it means has. Once the committed payments are counted, you're not looking at thirty thousand pounds of capacity. You're looking at a few thousand pounds of genuine room, and that's before anything unexpected happens.

Two different numbers

It's worth being precise about the distinction, because almost every avoidable cash problem lives in the gap between them.

• Your bank balance: what is in the account at this moment. It is a fact, and it is already slightly out of date.
• Your available cash: what is left after the payments you have already committed to, over whatever period you care about.

The balance is a photograph. Available cash is a short film. Decisions — hiring, buying stock, taking a discount for early payment, quoting on a big job — should be made against the film.

The bit nobody enjoys: money that isn't yours

Some of the balance was never business money in the first place. VAT collected on sales is money you're holding on behalf of HMRC. PAYE deductions are the same. It arrives in your account, it sits there, and it makes the balance look better than the position is.

Businesses rarely get into trouble because they decided to spend their tax money. They get into trouble because the balance looked fine and the tax was invisible until the deadline arrived.

Forecasting, without calling it that

The fix isn't complicated, and it isn't modelling. It's a list, laid out by week, of what you expect to come in and what you know is going out. Thirteen weeks is the length most professional cash teams use, for a simple reason: it's roughly a quarter — long enough to see something coming, short enough that you can still be honest about the numbers.

Put your opening balance at the top. Add expected receipts, week by week. Subtract known payments — payroll, rent, tax, suppliers, loan repayments, subscriptions. What you get is a closing balance for every week between now and three months from now.

The value isn't the forecast being right. It won't be. The value is that you can see week nine before you get there.

Three questions the forecast answers immediately

• What is the lowest point in the next thirteen weeks, and when does it happen?
• Is that low point survivable, or does it need a decision now?
• How much of my current balance is genuinely uncommitted?

Most owners find the answers slightly uncomfortable the first time, and then reassuring afterwards — because a tight week you can see eight weeks out is a manageable problem rather than an emergency.

A habit worth building

Once you have the forecast, resist the urge to make it clever. Extra tabs, formulas and scenarios rarely change a decision. Updating it every week almost always does.