Every founder we meet can quote their revenue. Far fewer can tell us, without opening a spreadsheet, how many weeks of cash they have left. That gap is where most avoidable business failures begin — not in the profit and loss account, but in the bank statement.

Profit is an accounting view. Cash is a survival view.

Accrual accounting recognises revenue when you raise the invoice, not when the money lands. A business can book ₹2 crore of revenue in a quarter, report a healthy margin, and still be unable to pay salaries — because ₹1.4 crore of that is sitting in receivables at 90+ days.

The classic trap
Growth consumes cash. Every new order needs inventory, people and working capital before the customer pays. Scaling a business with a 90-day collection cycle and a 30-day payment cycle is a structural cash drain, however good the margin looks.

Build a rolling 13-week cash forecast

A monthly P&L tells you what already happened. A 13-week cash forecast tells you what is about to happen, while you can still do something about it. Rebuild it every Monday with three inputs:

  1. Opening bank balance across all accounts, including any sweep or FD you would actually break.

  2. Committed inflows — invoices raised, with a realistic collection date rather than the credit-period date.

  3. Committed outflows — payroll, statutory dues, rent, vendor payments, EMI and advance tax instalments.

Make it honest
Use the date the customer actually pays, based on their last four payments — not the date printed on your invoice. A forecast built on credit terms rather than behaviour is a wish list.

The three cash drains we see most often

1. Receivables that quietly age

Pull an ageing report every fortnight and split it at 30 / 60 / 90 / 90+ days. Anything past 90 days needs a named owner and a dated action, not a reminder email. Consider linking a small part of the sales incentive to collection rather than to order booking.

2. Input tax credit that never gets claimed

GST input tax credit is only available when your supplier has actually reported the invoice and you have paid them within 180 days. Every unreconciled GSTR-2B line is working capital parked with the government. Reconcile monthly, not at year end.

Leak

Typical size

Fix

Receivables > 90 days

8–15% of annual revenue

Fortnightly ageing review with named owners

Unreconciled ITC

1–3% of purchases

Monthly GSTR-2B vs purchase register matching

Excess inventory

20–40 days of cash

Reorder levels based on actual lead times

Advance tax mismatch

Interest u/s 234B/234C

Quarterly profit estimate before each instalment

Where SME cash usually hides

3. Paying MSME vendors late — now a tax cost

Section 43B(h) of the Income-tax Act disallows a deduction for amounts payable to micro and small enterprises if they are not paid within the timeline agreed (capped at 45 days) — and the deduction only comes back in the year of actual payment. Delaying an MSME vendor across 31 March now inflates your taxable profit.

Check your vendor master
Collect the Udyam registration number from every vendor and flag micro and small enterprises in your accounting system. You cannot apply section 43B(h) correctly if you do not know which vendors it covers.

A simple monthly rhythm

  • Week 1 — close the previous month, reconcile bank, GSTR-2B and receivables.

  • Week 2 — collections review; escalate anything past 60 days.

  • Week 3 — vendor payment run, prioritising MSME dues and statutory liabilities.

  • Week 4 — refresh the 13-week forecast and stress-test it against a 20% revenue drop.

Revenue is vanity, profit is sanity, cash is reality. — An old finance adage that has never stopped being true

Want a cash flow review of your business?
Our team builds a 13-week forecast from your books and flags the leaks in the first sitting.
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