Small business owners wear a lot of hats, but cash flow is the one that quietly decides whether things feel stable or stressful. A business can look profitable on paper and still struggle if there is not enough cash in the account to cover payroll, pay a supplier or absorb a surprise bill. I have watched it happen to good businesses on good streets. Here is how it happens and how to stop it.
Profit is a story. Cash is a fact.
Profit is revenue minus expenses over a period. Cash is what is in the account today. They differ because of timing: you buy inventory in September and sell it in December; you finish a project in March and get paid in May; you collect HST all quarter and remit it in one lump. Every one of those gaps has to be bridged with cash you already have.
The Ottawa version of the problem
Three local patterns make this sharper here. First, seasonality: many businesses earn most of the year between May and September and carry fixed costs through a quiet winter. Second, government clients: federal departments and Crown corporations are reliable payers but slow ones, and a consultant or supplier can wait 30 to 60 days after invoice. Third, the March 31 fiscal year-end creates a spring rush of work followed by a lull in April and May while new budgets settle. None of these are problems if you see them coming.
Build a 13-week cash forecast
This is the one tool that matters. Thirteen columns, one per week. Rows: opening balance, cash in (by customer or source), cash out (rent, payroll, suppliers, HST, loan, owner pay), closing balance. Fill it with what you actually expect, not what you hope. The closing balance row tells you exactly which week gets tight, and thirteen weeks is enough notice to do something about it. Update it every Monday. It takes 20 minutes once it exists.
Speed up cash in
Slow down cash out, carefully
Ask suppliers for net-30 once you have a track record. Time big purchases for the week after your strongest deposits. Pay rent and payroll on time always; pay yourself on a fixed schedule so owner draws stop being a surprise. Use the corporate card’s grace period as a free short-term float, and pay it in full.
Separate HST and tax on arrival
The single most common cash crisis I see is HST. It sits in the operating account looking like money, gets spent in a slow month, and then remittance day arrives. Move it to a separate account the day it lands. Same for income tax set-asides. What is left is what you actually have.
Build the cushion in the good months
Your forecast will show the summer surplus and the winter gap. Sweep a fixed amount to a reserve account every strong week. Three months of fixed costs is the goal; one month changes how you sleep.
Arrange credit before you need it
Banks lend to businesses that do not need money. Set up a line of credit while cash is strong. If a bank says no, the Ottawa Community Loan Fund lends to local owners who cannot yet get a conventional yes, and the BDC has working capital products for growing companies. Both will want to see your forecast, which is another reason to build one.
The weekly habit
- Monday morning: update the 13-week forecast with last week’s actuals.
- Look at the lowest closing balance in the next 13 weeks.
- If it is below your comfort line, pick one action: chase an invoice, delay a purchase, draw on the line.
- Move HST and tax collected last week to their accounts.
That is 20 minutes a week. Owners who do it stop being surprised by their own business. Cash flow does not become easy, but it becomes visible, and visible problems are the kind you can solve.