9 December 2025 · 6 min read · Bruce Thomas
Profit is an opinion; cash is a fact. A business can be trading well, winning work and growing, and still be unable to pay its VAT bill — because growth consumes working capital before it produces it.
Why growth eats cash
Winning a larger contract means buying materials, paying wages and financing the work weeks or months before payment arrives. The bigger the win, the bigger the gap. This is the single most common cause of distress in otherwise healthy contracting and manufacturing businesses.
Building a 13-week forecast
- Start with the actual bank balance today
- List expected receipts week by week, based on invoices raised and realistic payment behaviour
- List payroll, PAYE, supplier payments, rent, finance and drawings
- Include VAT, PAYE and Corporation Tax on their real due dates
- Calculate the closing balance each week and look for the lowest point
Use behaviour, not terms
If a customer's terms are 30 days but they always pay at 55, forecast 55. A forecast built on contractual terms is a wish list, and it will be wrong in the direction that hurts.
Update it weekly
A forecast prepared once and filed is useless. Rolling it forward each week, and comparing what you predicted with what happened, quickly makes the assumptions accurate.
Acting on what it shows
- Tighten credit control before the low point, not during it
- Agree facilities with the bank while the figures still look strong
- Consider invoice finance where debtor days are structurally long
- Move VAT to monthly returns if you are usually in repayment
- Speak to HMRC early if a liability will be difficult
This article is general guidance for business owners in the UK and does not amount to advice for your particular circumstances. Tax rules change and the right answer depends on your figures — please take specific advice before acting.
