How to find your cash gap before it finds you

Most cash crises don’t arrive without warning. They creep up on a calendar nobody was looking at. A GST return, a pay run, a supplier statement and a provisional tax instalment all land in the same fortnight, and takings don’t.

The remedy is dull and works: write the next few weeks down. Here’s a method that takes about an hour the first time and ten minutes after that.

What is a cash gap?

A cash gap is the stretch where money going out runs ahead of money coming in. It’s about timing, not profit. A bakery can make a healthy margin on every loaf and still be short on the 20th, when PAYE falls due, if its largest customer pays on the 30th.

Two numbers describe any gap:

• Depth. The most you’re short at the worst point.
• Length. How many weeks the account stays below the buffer you want to hold.

Know both, and you know what kind of help you need.

Step 1: Set up a weekly grid

Open a spreadsheet and make a column for each of the next twelve weeks, starting this Monday. You need these rows:

Row	What goes in it
Opening balance	The week’s starting bank balance
Cash in	Customer payments you expect, with the week they’ll land
Cash out	Every bill, in the week it’ll leave
Closing balance	Opening + in − out

Next week’s opening balance is this week’s closing balance. That’s the entire mechanism.

Step 2: Fill in the money coming in

Be sober, not optimistic. For each invoice, use the date the customer actually tends to pay, not the date on the terms. If a client on 30-day terms usually takes 52 days, put it 52 days out. For takings from walk-in sales, use an average from the same weeks last year, adjusted for any change.

Leave out hopeful deals that aren’t signed. You can add a second, brighter version later.

Step 3: Fill in the money going out, tax first

Tax dates are the most predictable big hits, so put them in first:

• GST. Due on the 28th of the month after the period ends. The period ending 31 March is due 7 May, and the period ending 30 November is due 15 January.
• PAYE and KiwiSaver. Due by the 20th of the month for most small employers.
• Provisional tax. For a 31 March balance date, instalments fall on 28 August, 15 January and 7 May.
• Terminal tax. 7 February for a 31 March balance date.

Then add everything else: wages, rent, loan repayments, insurance, supplier statements, subscriptions and your own drawings. Check your calendar for annual items that are easy to forget, such as vehicle registration, insurance renewals and professional fees.

Want a second pair of eyes on your numbers? Start a 60-second enquiry and a real person will look at your gap with you.

Step 4: Find the lowest point

Scan the closing balance row. Highlight:

1. The lowest figure.
2. The first week it falls below your buffer (say, two weeks of wages).
3. The week it climbs back above.

The lowest point is the depth. The number of weeks between the first and last highlighted cells is the length.

Illustrative only. A plumbing business in Napier sees its closing balance dip to −$22,000 in week five, when GST and PAYE fall due together, and stay below zero until week eight, when a big commercial invoice should be paid. Depth: $22,000. Length: three weeks.

Step 5: Decide what to do about it

Now you can choose with clear eyes. Typical responses, roughly in order of effort:

1. Move money in. Chase invoices, ask for deposits, shorten terms. See getting invoices paid faster.
2. Move money out. Ask suppliers to shift due dates, and spread payments. Our supplier terms guide covers it.
3. Arrange Inland Revenue instalments if the gap is a tax bill. File on time first.
4. Bridge the gap. A business cash line or short-term loan sized to the depth and length you’ve just measured.

Because you know the depth and length, you can borrow what you need and no more, with a repayment date that matches the week the cash comes back.

Common mistakes

• Forecasting monthly. A month hides the mid-month dip where the real trouble sits.
• Counting GST as spendable. It belongs to Inland Revenue; the cash won’t be there when the return is due.
• Forgetting annual bills, which then arrive as a surprise.
• Trusting terms, not behaviour, for when customers pay.
• Never updating it. A forecast you don’t revisit becomes fiction within a fortnight.

Make it a weekly habit

Every Monday, replace last week’s forecast with what actually happened, then roll the grid forward one week. After a month, compare predicted with actual closing balances. You’ll learn where you’re consistently too hopeful, and the next forecast improves.

When the gap is seasonal

If your dip repeats each year, extend the grid to a full year and mark the quiet months. The seasonal cash flow page shows how to plan for the January shutdown and other predictable troughs, and our cash runway guide shows how many weeks of cover you’d have going in.

Use the calculator

If you’d rather not build a spreadsheet, the cash gap calculator takes your opening balance, expected receipts and bills, and shows the running balance, the deepest point and the length of the dip. It runs in your browser, so nothing you type is sent anywhere.

A short example of reading the grid

Imagine your grid shows an opening balance of $18,000 and a low of negative $9,000 in week six, climbing back above zero in week nine. That tells you three things at once: you would need roughly $9,000 plus a buffer to stay solvent, you would need it for about three weeks, and the pinch comes when a pay run and the GST return coincide. Armed with that, you might ask a supplier to move a bill, chase two invoices and arrange a small standby facility. Without the grid, you would simply have felt vaguely uneasy until the day it happened.

Take the number to someone who can help

When you know the depth and the length of a gap, a conversation with a lender gets short and useful. The enquiry takes about a minute, there’s no credit check to ask the question, and your details don’t get spread across a pile of lenders. A real person reads it and calls you.

Please give accurate dates and amounts. It’s how we match the cover to the gap rather than guessing.

Talk through my gap →