Payroll week and an empty account
It is the week before payroll. The finance manager checks the bank and sees there is not enough to cover wages. The second instalment of a trust grant was due last month, but it is released only after the progress report is accepted, and the funder has not yet reviewed it. Two council invoices are overdue because of a missing PO. The café's takings dipped over the school holidays, as they always do. The trading arm bought stock for the Christmas market.
None of this was a surprise on its own. Together, nobody saw it coming. The finance manager spends two days chasing the council, emailing the funder and talking to the bank, and a director transfers money from a reserve account the board had meant to keep untouched.
Why cash is hard to predict in a social enterprise
A social enterprise's income arrives in more shapes than most small businesses', and most of them are lumpy or conditional.
| Income | Why its timing is uncertain |
|---|---|
| Grant instalments | Released on reports being accepted, or on milestones |
| Council contracts | Paid in arrears, on their terms, subject to PO and invoice checks |
| Payment by results | Depends on outcomes being evidenced and claims processed |
| Trading | Seasonal, affected by weather, holidays and events |
| Social investment | Drawn down on conditions |
Costs, by contrast, are steady: wages every month, rent, loan repayments. The gap between the two is where cash problems live.
Decisions on reserves, borrowing or timing of spending are for your board and advisers. We do not give financial advice. We give them an early, clear view.
What cash surprises cost
Stress and distraction for the finance manager and directors, who drop everything to find money. Use of reserves that were meant for something else. In the worst case, late wages or supplier payments, which damage trust with staff and suppliers.
And missed chances. A social enterprise that does not know its cash position hesitates to take on a new contract or buy stock for a good opportunity, even when it could afford to.
A rolling cash forecast built from real patterns
What we build is a weekly cash forecast, updated from your own systems, for the next three to six months, or whatever horizon your board wants.
- The starting position comes from your bank feed through Xero or QuickBooks.
- Outstanding council and customer invoices are forecast to be paid on each payer's actual past payment pattern, not the invoice terms, so a council that usually pays late is forecast to pay late.
- Grant instalments are entered from each funding agreement with their conditions, such as report due, report submitted, report accepted, and the forecast date moves when a condition is not yet met.
- Trading income is forecast from the same weeks last year, adjusted by the manager for known changes such as a new site or event.
- Regular costs, such as payroll, rent, loans and suppliers, come from the accounts and scheduled payments, with one-off costs added by hand.
- The forecast shows the lowest point in each week and highlights weeks when cash falls below the minimum your board sets, with the items driving it listed.
Scenarios can be run, such as the grant being two months late or a new contract starting, so the board can see the effect before deciding.
The next squeeze, seen in advance
In September, the forecast shows a dip below the board's minimum in the second week of November. The drivers are listed: a grant instalment waiting on a report due in October, and the Christmas stock purchase. The finance manager brings the report forward, asks the funder about review timing, and staggers the stock order. The board is told at its October meeting, with the forecast attached.
November payroll goes out without anyone touching the reserve.
Could cash catch you out?
- Cash shortfalls are discovered in payroll week.
- Grant instalments arrive later than expected because of report conditions.
- Council payments are later than their terms.
- Trading income dips seasonally and catches you out.
- The board sees cash only as a current bank balance.