Money comes in. But do you know where it goes?

Start with a specific question

If a client delays their next payment, can you identify which business commitments would come closest to being at risk? You do not need to answer from memory. The purpose of a good financial record is precisely to take this information out of your head and put it somewhere you can consult, update and understand.

Cash flow is the movement of money into and out of your business. A record shows what happened; a forecast helps you consider what might happen. The official business.gov.au portal presents this distinction as a starting point for monitoring the availability of cash. The exercise below turns that idea into a practical routine, using a fictional example.

Making a sale and receiving payment happen at different times

Imagine a small service business that starts the week with 12 000 MT available. It has invoiced 18 000 MT for a job, but the client is not expected to pay until the following week. In the meantime, it needs to pay a supplier 7 000 MT and cover 3 000 MT in other expenses. Taking only these transactions into account, it ends the week with 2 000 MT.

The work sold matters, but it has not yet put money in the account. Record the date you expect to receive payment as well as the invoice date. When the payment arrives, replace the forecast with the actual transaction. Keeping these separate helps you avoid making a purchasing decision based on money that is still outstanding.

Create a sheet you can keep up to date

You can start with a spreadsheet, without creating dozens of categories. Choose a short period that makes sense for the way you work. For a first exercise, four weeks lets you look at upcoming commitments without requiring forecasts too far into the future. Also record how you confirmed each amount: a bank statement, invoice, contract or information that still needs checking.

Use one row for each transaction and label it clearly. A description such as ‘materials for client A’s delivery’ is more useful than simply ‘expense’. If you hold money in different accounts or payment services, check the total without counting a transfer between them twice.

• Opening balance: the money available at the start of the period.
• Expected receipts: amount, client and expected payment date.
• Expected payments: amount, purpose and payment date.
• Forecast balance: opening balance plus receipts, minus payments.
• Transaction status: expected, confirmed, received or paid.

Try a change before making a decision

Once you have completed the first version, make a copy and change one assumption. For example, the most important payment arrives seven days later. Look at which week the balance changes and which commitments need attention. The aim is to discover useful questions, rather than produce a perfect forecast.

You may find that you need to confirm the date with the client, reconsider the timing of a purchase you have not yet committed to, or prepare for a conversation with the supplier. Any changes to agreed terms should be discussed with the other party. A spreadsheet makes the issue visible; it does not replace existing commitments or make the decision for you.

Set aside a little time for your numbers

Choose a regular time to compare your forecast with what actually happened. What came in? What is still outstanding? Was an expense overlooked? Keep a short note of the differences. Over the weeks, these notes help you distinguish an occasional delay from a pattern that needs attention.

To start today, bring together your current balance, expected receipts and payments you have already committed to. Fill in the next four weeks and choose one question you need to clarify. Financial organisation develops through consistent information and informed decisions, one routine at a time.