6-to-8-Week Cash Flow Forecast
Look ahead for cash shortages and prepare reserves before the gap arrives
- Difficulty
- Easy
- Time to result
- ~weeks to results
- Steps
- 5
- Confidence
- 96%
The 6-to-8-Week Cash Flow Forecast is a rolling early-warning system for liquidity. Start with the current bank balance, then place expected receipts and payments into the week when cash will actually move, not when revenue or expense is recognized in the accounts. The projected weekly balance exposes timing gaps that a profitable income statement can hide. When a future balance drops too low, the owner still has time to accelerate collections, delay optional spending, draw an arranged line of credit, or use a business cash reserve. Updating the view regularly keeps the warning current. The method does not eliminate low-cash months; it makes them visible early enough to manage instead of discovering the shortage when a bill is already due.
Origin
Melissa Houston recommends this proactive short-range forecast for entrepreneurs and small business owners who lack the formal cash-management systems used by larger corporations.
Core principles
- 01Cash timing matters independently of profit
- 02Short forecasts reveal problems while options remain
- 03Low-cash periods are a normal business cycle
- 04Reserves turn a forecast warning into a manageable event
How to run it
- 1
Set the Opening Balance
Record the cash currently available in the business bank account. Exclude money that is restricted or already reserved for obligations.
Pro tip Use the real available balance rather than the accounting profit figure.
Watch out A profitable month can still begin with too little usable cash.
- 2
Place Expected Receipts by Week
List customer payments and other cash inflows in the week you realistically expect to receive them. Account for invoice terms and likely collection delays.
Pro tip Base dates on observed payment behavior, not only invoice due dates.
Watch out Revenue that has been earned but not collected cannot pay today's bills.
- 3
Place Expected Payments by Week
List payroll, suppliers, rent, tax, debt, and other outflows when they will leave the account. Include irregular commitments that are easy to overlook.
Pro tip Separate unavoidable commitments from optional spending so responses are clear.
Watch out Missing a large non-monthly bill creates a false sense of safety.
- 4
Find the Lowest Cash Point
Calculate the projected closing balance for every week and identify shortages or balances below a safe operating threshold. Focus on both the size and timing of the gap.
Pro tip Review the entire horizon rather than stopping at the first positive week.
Watch out A healthy ending balance can conceal a dangerous shortfall in an earlier week.
- 5
Prepare the Bridge
Choose how the business will cover a forecast gap before it arrives. Options include collecting sooner, reducing or rescheduling spending, using saved business cash, or drawing an arranged credit line.
Pro tip Arrange credit while the business is healthy rather than during an emergency.
Watch out Do not use borrowing to disguise a recurring loss-making model.
In the wild
A consultancy has strong booked profit, but its largest customer pays in 45 days while payroll is due in two weeks. The rolling forecast shows a three-week cash gap. The owner follows up on another invoice early, postpones optional software purchases, and uses a pre-arranged credit line for the remaining shortfall.
→ Payroll is covered without confusing unpaid revenue with available cash.
Common mistakes
Forecasting revenue instead of receipts
The method depends on when money reaches the bank. Recording invoice value as immediate cash hides the exact timing risk the forecast is meant to expose.
Waiting until cash is already short
Emergency action leaves fewer and more expensive options. Forecasting creates value by identifying the gap in advance.
Is it for you?
Best for
It is best for small businesses with invoices, uneven sales, seasonal demand, or other timing gaps between earning revenue and receiving cash.
Not ideal for
It is not sufficient on its own for a business already insolvent or facing long-term structural losses.
From the transcript
“you're going to forecast at least 6 to8 weeks ahead of time so you're looking into the future you're looking at where your bank balance…”
“so that you can identify if there's any time climbing issues and you've got like a shortage in cash”
“when you've got that shortage in cash it's also important to have reserves ready to use”
From the episode
Episode 282: Melissa Houston: How to Become Cash Confident as an Entrepreneur
Melissa Houston