Reading a cash-flow forecast when you are not an accountant

Your accountant prepares compliant financial statements. Your forecast spreadsheet — often built in a late-night session with a glass of wine — is a different document entirely. It is a story about what you believe will happen. Before you act on that story, check these five lines.

1. Revenue ramp assumptions

How many months until the new site, product line, or hire reaches full contribution? If the answer is “immediate,” ask what evidence supports that. Seasonal businesses in NSW often underestimate the gap between opening and steady-state revenue.

2. Debtor days

If your forecast assumes customers pay in thirty days but your last twelve months averaged fifty-two, the forecast is optimistic. Adjust debtor days to your actual trailing average, not your terms of trade.

3. Stock or WIP build

Expansion usually requires more inventory or work-in-progress before revenue follows. Check whether the forecast includes a working capital spike in month one — not just month six when sales arrive.

4. Owner drawings

Forecasts that assume you will take less from the business during a growth phase should be explicit. If the number is zero and you have never done that before, model what happens at your historical drawing level.

5. Contingency line

A blank contingency is not prudence — it is hope. A line item of 5–10% of operating costs, or a separate “delay scenario” tab, gives you something to show a bank or business partner.

None of this replaces professional advice. It gives you better questions to ask when someone else reviews your numbers — or when you review them yourself at midnight before a lease signing.