Cash flow forecast for agencies: payroll leaves before clients pay
In short
If an agency invoices on 30, 45 or 60 day terms, payroll leaves the account before the money arrives. A 13-week forecast lists each client's expected pay date, then payroll and other costs by the week they leave, so the tight week is visible before it arrives.
Why agency cash lags
If the team is paid monthly or every two weeks and clients pay 30, 45 or 60 days after the invoice, the cost of the work leaves the account before the revenue arrives. Growth makes that gap wider, because more work in progress means more payroll before the next payment. That is a timing problem, not a profit problem, and a monthly profit report does not show it.
Illustration, not data
What to put in the forecast, line by line
| Line | How to enter it |
|---|---|
| Retainers | On the date each client usually pays, not the invoice date. |
| Project milestones | In the week you expect the milestone payment to arrive. |
| Contractors | In the week you pay them, which may be before the client pays you. |
| Payroll | In every pay week, with employer costs. |
| Software and tools | On the billing date. |
| Tax and VAT or sales tax | On the due date. These are the weeks that break plans. |
| Rent | On the due date. |
The risk that moves everything: the top client
One large client paying a month late can move the whole forecast. Test it. In the Cash Cliff simulator the "top client pays a month late" decision assumes that client is 45% of cash in, and that their payments for weeks 1 to 4 arrive in weeks 5 to 8. Simulator demo, example numbers: with 60,000 in the bank, 11,500 coming in and 9,000 going out each week, and fixed costs of 28,000 a month, that one late client takes cash to a low of 49,300 in week 4 and leaves 3 weeks under the 56,000 floor, before it recovers. The business never runs out of cash, yet it spends three weeks in the zone where forced decisions start.
A Friday routine for an agency
- Type your actual bank balance.
- Log last week's real receipts and payments.
- Read the flags: a client who is late three weeks running is a new payment term, not bad luck.
- Roll the 13 weeks forward: copy, don't cut.
- Copy the new week-1 forecast into the log.
Worked example
The made-up example business shows the same shape: a client pays 3,000 instead of 7,000 in week 3, a tax payment lands in week 6, and cash ends the quarter under its floor. It is an example, not an agency benchmark.
Questions
Should I forecast by invoice date or pay date?
Pay date. The forecast is about when cash arrives, and a client's real pay date is what you have seen from them, not what the invoice says.
How many weeks ahead should an agency look?
Thirteen weeks covers a quarter: enough to see several payroll runs and a tax payment.
Does this replace my accountant's report?
No. Your accountant's report looks back. The forecast looks ahead, in cash. Keep both.
Related
Get the free 13-week starter
One 13-week tab. A standard .xlsx file, checked in Apple Numbers. Not yet checked in Excel or Google Sheets. It opens with an example business already filled in, so you can see the week its cash drops under the floor before you type a number. It shows your runway in weeks and the week your cash is lowest.
Download the starter (no email)- A 13-week cash line with the week your cash is lowest
- Your runway in weeks
- No account, no bank login
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