Five timing errors that weaken a loan cash-flow forecast

A cash-flow forecast is about when money reaches or leaves the bank, not merely when a sale or expense belongs in the accounts. A profitable month on paper can still end short of cash.

1. Recording invoices as immediate receipts

If customers usually pay 30 or 45 days after invoice, sales should not all appear as cash in the invoice month. Separate cash sales from account customers and use actual collection history where possible.

2. Forgetting VAT settlement months

VAT collected is not free operating cash. Reflect payments to SARS in the correct periods and be clear whether forecast lines include or exclude VAT. Inconsistent treatment can overstate the closing balance.

3. Ignoring supplier payment terms

A quotation gives a price, but the deposit and balance dates determine cash pressure. Equipment may require 50% on order and 50% before delivery; stock suppliers may expect seven-day payment even where customers pay later.

4. Starting the new instalment too late

Use the lender’s indicative schedule if one exists. If not, label the assumed interest rate, term and first debit date. Include existing finance separately so the proposed instalment does not hide another obligation.

5. Leaving out drawings and once-off costs

Owner drawings, annual licence renewals, insurance deposits and installation costs are often omitted because they do not recur monthly. They still affect the bank balance when due.

A useful final test

Start with the latest reconciled bank balance, calculate each month’s movement, and confirm that one month’s closing balance equals the next month’s opening balance. Then compare forecast timing with the last six to twelve months of bank activity. Explain every deliberate change rather than allowing a reviewer to guess.