What Is A 13 Week Cash Flow Model And Why Should Your Business Have One?

What is a 13-Week Cash Flow Model?

At its core, cash flow is the lifeblood of any business. It’s what keeps your operations running smoothly, whether you’re a small bakery, a growing eCommerce business, or a large manufacturing company. 

But how do you make sure you always have enough cash to cover your expenses? That’s where a cash flow model comes in.

So, what does ‘cash flow model’ mean?

In simple terms, a cash flow model is a tool that helps you plan your business’s finances by tracking how much money is coming in and how much is going out. It’s like a roadmap for your money, allowing you to see where it’s going, how much you’ll have in the future, and whether you need to make adjustments to stay on course. 

As specialists in cash flow modelling and financial management for CPG (consumer packaged goods) and eCommerce businesses, we know how critical it is to have a clear, forward-looking view of your finances. However, the concept of cash flow modelling applies to any type of business, in any industry. No matter what kind of business you run, having a plan for your cash can make a big difference in how smoothly things operate.

What is a 13-Week Cash Flow Model?

A 13-week cash flow model is a type of financial forecast that helps you look ahead over the next 13 weeks—roughly three months. It breaks down your expected cash inflows and outflows week by week, so you can see if you’ll have enough money to cover your upcoming expenses.

You might wonder, why 13 weeks? Well, the truth is that it’s just a guide. If you feel like you or your business would benefit from a shorter or longer forecasting period, then you do you - and modify to suit your needs.

The general idea, however, is that it’s long enough to spot any potential problems with your cash flow, like a time when expenses might exceed your available cash, but short enough to allow you to adjust quickly before things get too serious. It’s like checking the weather forecast, so you’re never surprised by any financial storms.

Whether you’re running a coffee shop, a CPG company, an eCommerce business, or even a tech startup, a 13-week cash flow model is a great tool to ensure you have the cash on hand when you need it.

Main Features of a 13-Week Cash Flow Model

So, what exactly makes up a 13-week cash flow model? Let’s break down the key features:

1. Cash Inflows: This is the money your business expects to receive over the next 13 weeks. It could come from sales, customer payments, or other income sources. For example, in a retail business, cash inflows might be the revenue from selling your products, while in a rental property business, it might be the rent you collect each month.
2. Cash Outflows: These are the expenses your business expects to pay during the same 13-week period. This could include things like rent, employee salaries, inventory costs, or supplier payments. The goal here is to map out all the money that will be leaving your business so you know exactly how much you’ll need to cover your costs.
3. Net Cash Flow: This is the difference between your inflows and outflows. Essentially, it tells you whether you’ll have extra cash (a surplus) or if you’ll come up short (a deficit). A 13-week cash flow model helps you identify weeks where you might run into a cash shortage, giving you time to find a solution, like cutting costs or securing additional funding.
4. Rolling Forecast: One of the best things about a 13-week cash flow model is that it’s always moving forward. Every week, you update it by adding a new week to the forecast, keeping the 13-week view fresh and relevant. This rolling forecast ensures that you always have an up-to-date picture of your cash flow situation.

Why is a 13-Week Cash Flow Model Important?

By using a 13-week cash flow model, you can anticipate cash shortages before they happen, giving you time to react. This is especially helpful for businesses with fluctuating income or expenses, like seasonal businesses or those in industries where payments are unpredictable.

For example, an eCommerce business might use a 13-week cash flow model to see when they’ll need extra cash to stock up on inventory before the holiday season. Similarly, a service business could use it to make sure they have enough money to pay employees during slow periods when customer payments are delayed.

No matter what industry you’re in, a 13-week cash flow model can be a valuable tool for keeping your business on solid financial footing.

Wrapping Up

In summary, a 13-week cash flow model is a crucial financial tool that helps businesses of all types plan for the future by forecasting their cash inflows and outflows over the next 13 weeks. It’s designed to help you spot potential problems, make better financial decisions, and stay flexible as things change.

At our firm, we specialize in cash flow modeling and financial management for CPG and eCommerce businesses, but the principles behind a 13-week cash flow model can be applied to any business, no matter the industry. Whether you’re running a local bakery, an online store, or a real estate venture, having a clear view of your upcoming cash needs will set you up for success.

If you’re interested in creating your own 13-week cash flow model, be sure to download a FREE copy of our cash flow template. Within it, you’ll find links to useful video guides and additional information. 

The most important thing is to start—because understanding your cash flow is the first step to a healthier, more stable business.