Payment Calendar: About the Tool and How It Can Help You

Take long-term planning: you’ll find out the value of your company in 10 years. But it’s useless if you need to know how much money you’ll have on your company’s account tomorrow. Let’s figure our which period of financial planning you need right now!

That’s your choice if you have such questions as:

• will the investment project pay off?
• will the company be financially sustainable?
• is the business able to repay the loan?

Only a long-term planning and financial model can answer these questions. The planning horizon can be as long as 5 or 20 years.

You can create mid-term plans based on the long-term ones. For example, you can divide your annual plan on quarterly — they would be more accurate and decide if the plans are reasonable. For example, you planned to enter the stock market in three years, but it turns out that things are going much worse than planned, and the strategy needs to be revised.

Annual budget is a must for any company, however, some important details are omitted there. For example, in global perspective, it is not so interesting in which month a company will receive a subsidy from the state. But in operational planning, every day matters. Often small businesses start with short plans — will there be enough money for the next month? And this is where a handy tool — the payment calendar — can help. Let’s talk about it in more detail.

A payment calendar is a table with a forecast of receipts, expenditures, and balances for each day.

It’s based on the cash flow statement. However, there are several differences. The payment calendar is:

• shorter financial planning period — usually 30 or 90 days.
• maintained and adjusted virtually online, not just once a quarter.
• more detailed. The cash flow statement operates with millions, and in the calendar, every hundred dollars can make a difference.

Not only does it help you understand if you have enough money on the exact day, but also:
Helps you be confident. Even if a cash gap is coming, you’ll have enough time to prepare.
Manage accounts payable and accounts receivable. You can find a way to make your money work.
Work on your financial discipline. Seeing the payment schedule, the accountant will definitely not forget to pay the office rent.

A calendar is a table. One column represents one day. In addition, you need to add the following indicators:

• income or expense item;
• counterpart;
• amount;
• account (s) (if accounts are opened in different currencies or several banks).

Firstly, let’s figure out how much money we are expecting to receive. We take everything into account: revenue, subsidies, and interest on the deposit. At some point, you may have to simplify things a bit. For example, a retail store can’t accurately forecast revenues, but it may well take the cash flow statement as a basis and calculate the average revenue for the day.
Approach the forecast realistically — if the buyer is constantly late with a payment, then move it for a couple of days in your plan. As a result, the revenue forecast for each day is ready.

Take the drilled-down expenses from your cash flow statement. The accounting department will tell you how much you have to spend on salaries, the investment department will tell you when capital expenditures are expected, and marketing specialists will let you know when they are planning to pay for advertising campaigns.

Obligatory payments are strictly attached to the dates. Interest on the loan is paid on the 20th, wages — on the 10th and 25th, but the paper for the printer can be bought after receiving payment from the buyers. At this step, we get cash flow balances and projected cash balances at the end of each day.

Exceeding outflows over inflows on some days is not a terrible situation (for example, if we pay for a new car worth several daily receipts). The alarming signal would be a projected negative cash balance. To prepare for this in advance, let’s divide all payments into several groups:

Keep in mind possible force majeure: do not plan for a zero balance, there should always be a reserve — for some companies, the benchmark may be 2 thousand, and for some — 2 million.

If you think creating a payment calendar is enough, you are not quite right. You have to work with it constantly. The key idea is to move receipts to an earlier period and expenditures to a later period. For example:

• negotiate prepayments with buyers and delayed payments with suppliers
• push back optional payments. If there is not enough money in the cash register, this is not the right time to buy a new car for the delivery person;
• find additional sources of funds. Arrange a sale, if there is no other way, take out a loan.

Our answer is yes. A payment calendar is good for any business. You have a risk of having a financial model left only in theory if you don’t have dates to associate it with. It’s of key importance to pay attention to the short periods of financial planning.