Cash is king…so forecast it !

Why cashflow forecasting is essential for small and medium-sized businesses

Running a successful small or medium-sized business (SME) isn’t just about growing revenue — it’s about ensuring your business always has enough cash available to operate confidently. Cashflow forecasting gives business owners a clear, forward-looking view of their financial position, helping to manage capital needs and make smarter operational, staffing, and investment decisions.

At Tullastone, we support Australian SMEs by managing their ongoing accounting function and delivering insightful reporting and visualisation solutions — powered by tools like Power BI.

Cashflow forecasting and reporting is a cornerstone of any SME finance operation.

Maintaining a cashflow forecasting model

Cashflow forecasting estimates the cash flowing in and out of your business over a set timeframe. A well-built forecasting model ensures the business can meet upcoming obligations such as payroll, supplier payments, rent, tax, loan repayments, and equipment purchases. It also helps you manage any potential negotiations with customers facing cash constraints — helping you make informed decisions around extended payment terms.

Unlike tracking revenue and profit, cashflow forecasting focuses on the timing of receipts and payments. In addition to revenue and expenses, the forecast also includes balance sheet and capital transactions like loan repayments, GST payments, and large asset purchases. This forward-looking lens is critical to managing sufficient working capital for your business.

Why SMEs must prioritise cashflow forecasting

Cashflow problems are one of the top causes of financial stress for SMEs — even for businesses that are profitable on paper.

Effective cashflow forecasting helps SMEs:

• Avoid unexpected shortfalls that disrupt operations

• Plan for large or irregular expenses

• Manage GST, PAYG, and income tax obligations — including planning ATO payment arrangements

• Support growth opportunities with clear funding strategies

In short, cashflow forecasting gives SMEs the insight and foresight needed to stay in control.

Core elements of an effective cashflow forecast

1. Tracking Actuals and Keeping Forecasts Live

An effective forecast model starts with real-time tracking of actual data. Comparing month, or quarter-to-date figures with your forecast provides context over your numbers and helps provide visibility over potential variances or areas where you need to re-forecast against what has actually happened.

Integrating tools like Xero to sync data directly into your model ensures forecasts stay accurate and relevant without constant manual updates.

2. Picking the Right Forecasting Period: Monthly or Weekly

Your business model determines how granular your forecast should be. Example forecast periods include:

• Monthly: Service-based with steady billing cycles (e.g. professional services)

• Weekly: High-volume trading (e.g., retail)

• Monthly or Quarterly: Capex-heavy or scaling businesses that are assessing capital requirements

We often start with monthly forecasts to get a feel for the best approach to take and tracking against prior period monthly actuals. This can then be moved to weekly views if required during peak seasons or when cashflow gets tight.

3. Managing Payroll Commitments

Payroll is often the largest fixed cost in an SME. A reliable forecast needs to capture:

• Salaries and wages inclusive of PAYG withholding

• Superannuation liabilities - currently quarterly (noting the introduction of Payday Super from 1 July 2026, where employers will be required to pay their employee’s super at the same time as their wages)

• Contractor and bonus payments

Mapping payroll accurately allows you to plan cash needs well in advance — particularly when also managing associated PAYG and payroll tax obligations.

How cashflow forecasting helps SMEs make smarter decisions

Forecasting isn’t just about avoiding cash gaps. It helps business owners make confident, timely decisions:

• Hiring: Can we support new salaries sustainably?

• Inventory: When should we purchase stock? Can we negotiate better payment terms with our suppliers?

• Expansion: Is now the right time to open another site or launch a new product?

• Loan planning: How are we looking for the upcoming refinance?

SMEs that forecast well can plan proactively rather than reactively.

Best practices for building reliable cashflow forecasts

1. Maintain High-Quality, Timely Data

Accurate forecasting starts with clean data — from bank reconciliations to invoicing and payroll. Quality bookkeeping is where it all starts.

2. Regularly Review and Refresh Forecasts

Review your forecasts monthly or weekly to keep pace with changing conditions. Don’t wait until problems emerge — update forecasts ahead of time.

3. Scenario Planning and Sensitivity Testing

Model different assumptions and situations:

• What if a customer asks for extended terms?

• What if staff request increased hours?

• What if we fall behind on GST or PAYG? Should we look to enter into a payment plan with the ATO?

• What if interest rates change?

Running different scenarios will allow you to stress test the forecast assumptions and get more comfort over your numbers.

Common pitfalls in cashflow forecasting for SMEs

• Including overly optimistic revenue assumptions - i.e. forecasting ‘blue sky’ outcomes rather than contracted or highly probable revenue

• Excluding tax liabilities like GST, PAYG, and income tax - for example, forecasting net salaries and wages paid rather than gross wages including payment of PAYG

• Failing to account for timing differences (e.g., when invoicing ≠ when payment is received)

• Not updating forecasts after major business events (e.g., hiring, new contracts or investment needed in new capital equipment)

Avoiding these pitfalls ensures your forecast reflects reality, not wishful thinking.

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More information

Please reach out to us if you would like more information and to discuss your specific circumstances in more detail.