Cash flow sits behind every loan request, so this blog opens with it: a forecast method, a 13-week worked example for a Yolo County, CA distributor, and steps that move cash earlier or payments later.
How Yolo County, CA wholesale distributors prepare a cash flow forecast
A cash flow forecast lists, week by week, the cash a business expects to collect and to pay, with the running balance at the end of each week. It is not a profit and loss statement: a sale booked this week counts there at once, but in the forecast it counts only in the week the customer pays.
- Start from today's bank balance, not from the books.
- Enter collections in the week each customer has actually paid in the past, using the receivables aging report rather than invoice due dates.
- Enter payments on their due dates: payroll, rent, supplier bills, loan and lease payments, insurance and taxes.
- Subtract payments from collections for each week and carry the ending balance forward.
- Mark the low point of the balance and its week; that week sets the size and timing of any credit line or loan.
Step 2 carries the weight for a distributor. When customers pay on net-30 or net-45 terms, a large order shipped this month turns into cash a month or more later, while the supplier bill for that stock can fall due first.
Building a 13-week cash flow forecast at a Yolo County, CA distributor
Thirteen weeks is one quarter: long enough to catch payroll cycles, rent and a large supplier bill, short enough to forecast one week at a time. In the example, payroll runs every other week, rent every fourth week, an existing loan takes $2,350 in weeks 4, 8 and 12, and a $28,500 stock bill lands in week 6.
| Week | Cash in | Cash out | Ending cash |
|---|---|---|---|
| Week 1 | $16,700 | $26,200 | $16,500 |
| Week 2 | $18,900 | $6,400 | $29,000 |
| Week 3 | $15,300 | $19,000 | $25,300 |
| Week 4 | $19,600 | $8,750 | $36,150 |
| Week 5 | $17,800 | $26,200 | $27,750 |
| Week 6 | $14,100 | $34,900 | $6,950 |
| Week 7 | $16,400 | $19,000 | $4,350 |
| Week 8 | $22,300 | $8,750 | $17,900 |
| Week 9 | $20,000 | $26,200 | $11,700 |
| Week 10 | $17,200 | $6,400 | $22,500 |
| Week 11 | $20,800 | $19,000 | $24,300 |
| Week 12 | $19,400 | $8,750 | $34,950 |
| Week 13 | $18,300 | $26,200 | $27,050 |
The balance bottoms out at $4,350 in week 7, after the stock bill, and ends week 13 at $27,050. If the owner sets an invented floor of $15,000, the forecast shows a $10,650 shortfall in week 7, and a line of credit drawn that week and paid down as later invoices clear is the kind of use a credit line is for. All figures are invented; the method is the point.
How Woodland, CA wholesale distributors can improve cash flow before borrowing
Some gaps shrink without a loan. Each step below moves cash in earlier or payments out later:
- Invoice the day goods ship, not at the end of the month.
- Follow up on an invoice as soon as it passes its due date, not weeks later.
- Price an early-payment discount before offering it: 2% off for payment in 10 days on a net-30 invoice costs about 37.2% a year for 20 days of cash (our arithmetic).
- Ask suppliers for longer terms on the big recurring orders.
- Clear slow-moving stock: inventory on the shelf for months holds cash that a credit line would otherwise carry.
- Ask whether fixed payments, such as a lease or a loan, can fall just after the big collection weeks.
If the forecast still shows a gap after these steps, the size and the week of that gap are the starting point for a call about a working capital loan or a line of credit.
Articles for Woodland, CA wholesale distributors and sit-down restaurants
Articles on this blog take up one funding question at a time for Woodland, CA owners: financing a food truck, working capital for distributors, loans for retailers, manufacturing equipment, card-sales advances for restaurants and the paperwork behind a loan file. Alongside them, the cash flow method above and the resources page cover the groundwork.
- Food Truck Financing in Woodland, CA
- Working Capital for Woodland, CA Distributors
- Retailer Loans in Woodland, CA
- Manufacturing Financing in Woodland, CA
- Card-Sales Advances for Woodland, CA Restaurants
- The Loan File a Woodland, CA Owner Puts Together
By Timbershore Lending Group · Updated