How to Accurately Forecast Cash Flow When Late Payments are a Reality

19 December 2025

Toby Patrick

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Finances are crucial for any business, and these need to be managed properly for the company to be successful. Cash flow needs to be consistent without any hurdles so that everything can operate smoothly, but there can be trouble with this due to the world becoming a cashless society. Missed customer payments can get in the way of this and cause disturbances to the business's finances.

Coins on a laptop keyboard beside glasses and a cup of coffee. A digital clock reads “12:53” in the background.

An accurate cash flow forecast is critical for operational stability, but traditional models that assume prompt payment often lead to nasty surprises that can stun businesses. To create a robust forecast that accounts for the reality of late payments, you need to shift your focus from when an invoice is due to when the cash is historically received. We’ll explore this throughout the article, so continue reading to find out more.

Forecasting Cash Flow

Analyse Your Historical Collection Behaviour

An accurate cash flow needs a shift in focus from an invoice's contractual due date to the historical reality of customer payment behaviour. The most basic analytical tool for this is the Days Sales Outstanding (DSO), which reveals the average number of days your company takes to collect payment after a sale. Calculating your DSO over the last 6 to 12 months gives you a critical correction factor. For example, if your standard payment term is 30 days but your average DSO is 45 days, you must project the realistic collection date for future invoices at 45 days.

For a more granular and powerful projection, businesses should conduct a payment pattern analysis. This involves analysing past data to determine the specific percentage of total invoice value collected in the month the invoice is due.

Segment Your Customers

Segmenting your customers into different tiers will give you a clearer picture of who is most and least likely to miss payments, as it gives you a collection pattern for each group. Your reliable payers are customers who always pay on time, so you can forecast their payments close to the due date, as you know you can trust them. Then, you’ll have the average payers who consistently pay a week or so after the payment date. This is where you’ll apply your DSO or the delayed collection pattern to give you some wiggle room for these late payments.

You also have to deal with the problematic payers. These are customers who often pay over 60 days late or require a lot of chasing for them to complete a payment. You should forecast these amounts with a significant delay or flag them as uncertain, so you won’t expect that money to enter your cash flow any time soon.

Scenario Planning

The best-case scenario planning assumes optimistic sales and that customers adhere strictly to the current DSO, which helps to identify any extra cash that can be used for strategic investments. The most likely scenario relies on realistic assumptions, using the payment pattern analysis and conservative sales projections to guide daily operational decisions.

The worst-case scenario assumes significant delays and higher bad debt assumptions, which focuses on this scenario's lowest cash point, allowing the business to proactively secure necessary financing or implement cost-cutting measures before a potential cash crisis hits.

Best Practices for Maintenance

Rolling Forecast

Do not create a forecast for just a single month, as you’ll need a long-term plan to better balance your finances when you’re receiving missed payments. Use a 90-day rolling forecast that you update every week to give you the most realistic expectations. As the current week ends, you add a new week to the end of the projection. This keeps you constantly looking forward and planning for the future.

Actual vs. Forecast Analysis

At the end of every month, compare your actual cash flow with your forecasted flow to see if it matches or differs. This will allow you to analyse the reasons for the difference, so you can get a better understanding of where your money is going. This feedback loop is essential for improving the accuracy of future predictions.

Incentives and Penalties

Factor the impact of any credit control measures into your forecast. If you implement a late fee, forecast that some late payers will pay slightly sooner to avoid the penalty. This will also deter customers from making late payments in the first place, as they won’t want to receive any penalties for it.

Final Thoughts

While credit insurance is still the biggest protection against customer missed payments, consider integrating specialised accounting software that can automate DSO calculations. This will free up your finance team to focus on analysis rather than manual data entry. This tool converts uncertain future payments into a guaranteed recovery rate, adding more security that stabilises your balance sheet and ensures that even the most unpredictable customer behaviour does not ruin your operations.

You should combine a few different methods, using technology, risk mitigation and continuous analysis to forecast reality while future-proofing your business against the volatility of the collections process.

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Navigating the Royal Path: A Deep Dive into British Royal Succession

Paul Francis
Feb 7, 2024
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Store window display on The Stand, London, to celebrate the Marriage of Prince Charles and Princess Diana, 1981 — Photo by Annie Spratt on Unsplash

White House, Public domain, via Wikimedia Commons

This week, news of King Charles's recent cancer diagnosis has sparked conversations about the future of the British monarchy. With the diagnosis caught early, the question lingers: could Prince William find himself ascending the throne sooner than expected? Delving into the intricacies of royal ascension is like unravelling a captivating saga, and I'm here to guide you through it. So, buckle up as we embark on a journey to explore the fascinating world of British Royal Succession, understanding its nuances, and uncovering the recent changes that shape its path.

1. Primogeniture and Its Historical Significance:

Primogeniture, derived from Latin, translates to "firstborn," a principle deeply embedded in the fabric of royal succession. Historically, this practice aimed to bring order to the line of inheritance, ensuring a clear and uncontested path for the eldest child to ascend the throne. The concept echoes through centuries, portraying a visual narrative of a lineage where the firstborn son stands poised to carry the weight of the crown.

2. Male-Preference Cognatic Primogeniture:

Now, let's take a step back into an era where gender played a defining role in succession. Male-Preference Cognatic Primogeniture, an age-old tradition, accorded preference to male heirs over their female counterparts. This meant that even if an elder sister was born before her younger brother, the throne awaited him. The dynamics of royal succession were influenced not only by birth order but also by the gender of the heirs, creating a hierarchy within the royal family.

3. The Succession to the Crown Act 2013: A Modern Shift:

The turning point in the royal succession narrative comes in the form of the Succession to the Crown Act 2013. This legislative milestone marks a departure from centuries-old norms by dismantling the gender biases entrenched in the system. With absolute primogeniture now in play, the eldest child, whether a prince or a princess, takes centre stage. The Act is a testament to the monarchy's adaptability, aligning itself with contemporary principles of equality and fairness.

4. Direct Descendants and Extended Family:

Navigating the family tree of the British monarchy reveals a dynamic interplay of direct descendants and extended family members. The direct line includes children, grandchildren, and great-grandchildren, forming the core branch of the royal genealogy. Beyond this direct line, siblings of the reigning monarch and their descendants add complexity to the succession hierarchy. This intricate web of familial connections ensures a robust and comprehensive order of succession, balancing direct lineage with broader family ties.

5. Marriage and Religion: Legal Changes in the Succession Rules:

In the realm of royal marriages, the Succession to the Crown Act 2013 introduces significant shifts. Previously, marriage required the monarch's approval, and marrying a Catholic could alter one's position in the line of succession. The Act, however, liberates royal hearts, allowing love to blossom without the need for regal consent. It also eliminates the disqualification for marrying a Catholic, emphasizing personal choice over religious affiliations in matters of the heart.

6. Parliamentary Approval and Constitutional Dynamics:

Behind the scenes of royal succession, the political stage takes centre focus. Any substantial changes to the rules of succession demand the scrutiny and approval of the United Kingdom's Parliament. This democratic safeguard ensures that alterations to the constitutional framework of the monarchy are subject to thorough debate and democratic approval. It adds a layer of checks and balances, highlighting the intersection of tradition and modern governance within the royal framework.

As we navigate the twists and turns of the British royal succession, it's clear that the monarchy is a dynamic institution, blending tradition with the demands of the times. With King Charles's health in the spotlight, the question of succession takes on a new relevance. The journey from primogeniture to absolute primogeniture tells a tale of adaptation, progress, and a monarchy evolving to reflect the values of the world it serves. So, join me as we uncover the secrets and stories behind the regal path that winds through the heart of the British monarchy.