The problem you find out about on the 24th
A Johannesburg distribution company has a good year on paper. Sales are up, the order book is full and the accountant's management accounts show a profit. Then, on the 24th of a month, the owner opens the bank app and sees that the balance will not cover salaries on the 25th, the VAT payment due at month end and a supplier who has already phoned twice. Nothing about the business changed overnight. The warning was always there, in invoices that were not collected, a stock purchase that was made early and a payment run that was larger than usual. It simply was not visible until the balance went red.
That is the pain this article covers: not seeing cash-flow problems until they become urgent. The distinction matters. Late collection, covered in inconsistent payment follow-up, is one cause of a cash shortfall. Here the focus is on the missing early warning, and what the business pays when it has to react in days instead of planning over weeks.
Profit and cash are different things
Many owners watch the profit figure and the bank balance and assume that these two numbers together describe the business. They do not. Profit is a measure of the business's performance over a period, built from invoices raised and costs incurred. Cash is what actually moved through the bank. A company can be profitable and still run out of cash if customers pay in 60 days while suppliers, staff and the tax authority are paid in 30 or fewer.
The gap is made from ordinary items:
- Debtors. Sales that have been invoiced but not yet collected are profit that cannot be spent.
- Stock and deposits. Buying ahead for a busy season uses cash months before the revenue arrives.
- Tax and statutory payments. VAT, employees' tax and provisional tax fall due on fixed dates whatever the bank balance happens to be.
- Annual or quarterly bills. Insurance, licences and software renewals arrive in lumps that a monthly view hides.
- Capital items. A vehicle, a machine or a fit-out is paid for once, but shows in profit as depreciation over years.
What delayed warning costs
When the first signal is an urgent one, the business has fewer choices, and the choices it has tend to cost more. These costs are rarely labelled as a result of poor forecasting, which is part of why they are tolerated.
Expensive short-term funding
A last-minute overdraft increase, a merchant cash advance or an early-settlement discount offered to a customer can each cost far more than planned borrowing. Imagine an illustrative R400,000 gap bridged for three weeks at an annualised rate of 30 percent. That is roughly R7,000 in interest for a problem that a two-week warning could have handled with a call to the bank on better terms.
Penalties and strained relationships
Statutory dates do not move. SARS publishes the VAT obligations and tax periods for vendors, and the same applies to the monthly employer declarations described on the employer declarations page. Missing a due date can add penalties and interest on top of the original amount. Suppliers react more slowly but just as surely: a business that pays late twice may lose its trade terms and be asked for cash on delivery.
Decisions made in a panic
Under cash pressure, owners postpone maintenance, freeze hiring, push customers harder than their relationships can bear, or discount prices to bring in money quickly. Some of these decisions are right. Many would not have been taken at all with a month of notice.
Owner time and attention
The worst cost is hard to put in Rand. A week spent chasing money, juggling creditors and calling the bank is a week not spent selling or serving customers. The business moves from running to firefighting, and the owner is usually the only person who can do it.
Why the warning never arrives
Most small businesses have the numbers needed for an early warning. They fail to see it for practical reasons.
- The information is spread out. Receivables sit in the accounting system, orders in a sales tool, payroll commitments in another package and supplier terms in people's heads.
- The reports look backwards. Management accounts arrive two or three weeks after month end, which is too late to change this month.
- The forecast is a one-off. Someone built a cash-flow spreadsheet for the bank at a funding application, and it has not been touched since.
- Nobody owns it. The bookkeeper records, the accountant reports and the owner decides, but nobody is responsible for looking ahead each week.
- The books themselves lag. Where the month-end close depends on manual work, as described in manual month-end close, the data behind any forecast is already out of date when it is used.
The week the owner stops sleeping, described in the cash-flow week that keeps the owner awake, is usually the result of all five at once.
A simple early-warning routine
A working early-warning routine does not need a finance director or a new system. It needs a rolling view of the next 13 weeks that is updated at a fixed time every week, by a named person, using three inputs: expected receipts, committed payments and the opening bank balance.
Receipts should come from the debtors list, adjusted for how customers actually pay rather than for their terms. If a customer on 30-day terms usually pays in 52 days, forecast 52. Payments should include every known commitment: salaries, rent, supplier runs, VAT, employer taxes, loan instalments, insurance and annual renewals. The result is a weekly closing balance and, more usefully, the lowest point and the week it occurs.
Then set a trigger. A reasonable one is: if the forecast balance in any of the next eight weeks falls below one month of fixed costs, the owner and finance lead meet within two days and choose an action. The action might be to bring forward a collection call, delay a purchase, negotiate a supplier date or arrange funding while the business still looks healthy to a lender. Acting early also leaves the lender with a more positive picture, since banks respond better to planning than to emergencies.
Late invoicing makes every one of these weeks worse, because cash that should have started its 30 days at the date of delivery starts only when the invoice goes out. The effect is covered in late invoicing and cash flow, and fixing it is often the cheapest improvement available.
Practical next actions
- Build a 13-week cash view this week. Use a spreadsheet with one row for each week, listing opening balance, expected receipts, committed payments and closing balance.
- List every fixed date for the next six months. Include VAT, employer declarations and payments, provisional tax, insurance renewals and annual licences, and put them in the forecast as certain items.
- Forecast receipts on real behaviour. Check the last six months of payments from your ten biggest customers and use the actual number of days they take.
- Appoint one owner and one weekly slot. Fifteen minutes every Monday, with the same person updating the sheet and the owner reviewing it.
- Set a trigger and agree the responses beforehand. Decide what you will do at one month, two weeks and one week of cover so that decisions are not invented under stress.
- Talk to your bank before you need them. Share the forecast and ask about overdraft terms while the numbers are healthy.
The aim is not a perfect forecast. It is a business that learns about a shortfall five weeks ahead instead of five days ahead, and that has time to choose a cheaper way to deal with it.
Sources and further reading
- Value-Added Tax - South African Revenue Service (last verified 10 October 2026)
- COMPLETING AND SUBMITTING EMPLOYER DECLARATIONS - South African Revenue Service
- Businesses and Employers - South African Revenue Service
Related Mellorca reading
- Which Customers Are Becoming Payment Risks? The Cost of Acting Late on Overdue Accounts
- Expiry Dates in a Spreadsheet: The Cost of Acting Too Late on Renewals
- Waiting Weeks for Management Reports: What Late Visibility Costs the Business