Key Takeaways
- Cashflow forecasting helps prevent financial surprises and improves decision-making
- Many tradies and small business owners avoid forecasting because it’s too complicated or time-consuming
- The right tools and a simple approach can make forecasting easy and useful
- Use real numbers, plan for seasonality, and regularly review your forecast
- Forecasting gives you confidence, especially when planning for growth or downturns
For many tradies and small business owners, cashflow problems don’t happen because of a lack of work. The jobs are there, the invoices are going out, but the bank account still looks bare. This is where cashflow forecasting becomes not just useful, but essential.
A good forecast can help you avoid sleepless nights, plan for big expenses, and grow your business with confidence. The challenge? Many forecasts are too complicated to maintain or never get used after the first draft. Let’s change that.
Why Cashflow Forecasting Matters
Cashflow forecasting is simply the process of estimating the money coming in and going out of your business over a period of time—typically weekly, monthly, or quarterly. Done right, it helps you:
- Spot cash shortages before they become a crisis
- Decide when to invest in tools, vehicles, or staff
- Plan for tax bills, supplier payments, and slow periods
- Negotiate better terms with confidence
It’s not just about avoiding trouble. It’s about taking control.
Why Most Forecasts Fail
Many small business owners either don’t forecast at all or stop using their forecasts after a few weeks. Why?
- Too complex: Some templates are overloaded with formulas and detail
- Too optimistic: Forecasts that assume every quote becomes a job can paint a false picture
- Not updated: A forecast is a living tool, not a one-off task
The key is to make it simple, realistic, and something you actually review each week or month.
Step-by-Step: Building a Forecast That Works
1. Choose Your Tool
You don’t need fancy software. Start with a spreadsheet or use a simple cashflow tool built into your accounting system like Xero or QuickBooks. Look for one that lets you easily input expected income and expenses and gives a clear visual of your cash position.
2. Set a Timeframe
Start with the next three months. That gives you a short enough window to predict with reasonable accuracy but still provides time to act on any issues.
3. Estimate Income
- Look at upcoming work that’s been booked or quoted
- Consider your average monthly income if your work is steady
- Include expected payment timing, not just when the job is done
If you do a lot of progress payments or contract work, be realistic about when those funds will actually land in your account.
4. List Out Expenses
This includes:
- Wages and super
- Subcontractor payments
- Materials and equipment
- Vehicle costs and fuel
- Insurance, rent, and tools
- Loan repayments and tax bills
Be thorough. Missing just one big cost can throw the whole forecast out.
5. Add GST and Tax Timing
Don’t forget about BAS payments, PAYG instalments, and superannuation. They often come in quarterly chunks and can wreck your cashflow if you haven’t planned for them.
6. Factor in Seasonality
If you slow down over Christmas or have seasonal lulls, reflect that in your income assumptions. Likewise, if winter or summer are your busy seasons, show the expected income rise too.
7. Update and Review
Your forecast is a working tool. Update it regularly—ideally monthly. Compare your actuals against what you forecasted and adjust as needed. Over time, this helps you become more accurate and confident in your numbers.
Common Pitfalls to Avoid
- Guessing instead of using data: Use past bank statements and invoices as your guide
- Ignoring timing gaps: The delay between doing the job and getting paid matters
- Overestimating income: Be conservative with your projections
- Not involving your team: Your admin staff or bookkeeper may have insights into timing and costs you overlook
Getting Extra Help
If you’re time-poor or unsure, your accountant or bookkeeper can help you set up a forecast that’s easy to update. It’s worth the upfront time to get it right.
You can also explore cashflow planning tools like Float, Fathom, or Spotlight Reporting if you want more visual dashboards and automated updates linked to your accounting software.
Final Thoughts
Cashflow forecasting doesn’t need to be complicated to be powerful. For tradies and SME owners, it’s one of the most important tools you can have in your business toolkit.
Done right, it helps you sleep better at night, make better financial decisions, and grow your business with fewer surprises. Build a system you’ll actually use, and use it regularly. That’s where the real power lies.
