—Guide
Cash Flow Forecasting for Small Businesses in India: A Practical Guide
Why profitable businesses still run short of cash, and how to build a simple cash flow forecast that includes GST, TDS, advance tax and payroll dates.
Profit and cash aren't the same thing. A business can be profitable on paper and still be unable to pay salaries, because its customers haven't paid yet, its money is tied up in stock, or a tax payment has fallen due. A cash flow forecast shows these gaps before they happen.
What a Cash Flow Forecast Is
A forecast of the cash you expect to receive and pay out, week by week or month by month, and the balance that results. Unlike a profit forecast, it's based on when money actually moves, not when income is earned or expenses incurred.
Building One: The Inflows
- Collections from customers, based on how quickly they actually pay, not your stated terms.
- Other receipts: loans, capital infusions, refunds, interest.
The Outflows
- Supplier payments, based on your actual payment terms.
- Salaries and payroll costs.
- Rent, utilities and other fixed costs.
- Loan repayments and interest.
- Capital spending.
- Statutory payments on their actual due dates.
Statutory Dates in India
These dates don't move, and they often catch businesses out:
- GST: tax payable with GSTR-3B, generally by the 20th of the following month for monthly filers.
- TDS: deposited by the 7th of the following month, with the March deduction due by 30 April.
- Advance tax: instalments due by 15 June, 15 September, 15 December and 15 March.
- PF and ESI contributions, generally by the 15th of the following month.
- Professional Tax, on the dates set by your state.
Use Realistic Assumptions
The most common mistake is assuming customers pay on time. Base collections on actual history. If your terms are 30 days but customers typically pay in 55, forecast 55.
Look Far Enough Ahead
Forecast at least three months in detail, week by week if cash is tight, and a further nine months monthly. Update it every week or month with actuals.
Act on What It Shows
- Chase overdue receivables.
- Negotiate supplier terms before you need to.
- Arrange a working capital facility while the business looks healthy.
- Delay discretionary spending if a gap is coming.
Getting Help
Think Filing builds cash flow forecasts for small businesses, with statutory payments on their real dates, and helps you keep them updated.