Cash Flow Forecasting for New NZ Companies: A First-Year Guide

Why Cash Flow Matters More Than Profit

Your P&L might show a profit while your bank account is empty. This happens because profit is an accounting concept — it includes income you have invoiced but not yet been paid, and excludes loan repayments and GST liabilities that are not expenses.

Cash flow is the money actually in your bank account. In the first year of business, managing cash flow is usually more urgent than optimising profitability.

The Four Cash Flow Killers for New NZ Businesses

1. GST timing: If you register for GST, you collect 15% on your sales but hold it for the IRD until your GST return is due (monthly or two-monthly). That money is not yours — it is a liability that will come due.
2. Slow-paying clients: B2B customers often pay on 30–60 day terms. If you pay your expenses monthly but get paid quarterly, you can run out of cash even with a full order book.
3. Seasonal revenue: Many NZ businesses peak in summer and trough in winter. Failing to save during peak months leaves nothing for the off-season.
4. Unexpected equipment or staff costs: Hiring a new employee costs more than their salary — there is ACC, KiwiSaver contributions, and often training costs in the first month.

Building Your First Cash Flow Forecast

A simple 13-week cash flow forecast in a spreadsheet is enough for most new businesses. Track:

• Opening bank balance each week
• Expected cash in: invoices due (not issued — due), any loan drawdowns
• Expected cash out: wages, rent, supplier payments, GST return, loan repayments, ACC instalment
• Closing balance: opening + in - out

A negative closing balance in any week is a warning. You need to either collect cash earlier (follow up invoices), delay a payment (with the supplier's agreement), or draw from a credit facility.

Key NZ-Specific Timing Traps

• GST returns: Monthly filers pay by the 28th of the following month. Two-monthly filers have longer to hold but larger lumps when it is due.
• Provisional tax: Your first provisional tax instalment may arrive 12–18 months after you start trading, but the amount is based on your first year's profit. Many new directors are blindsided by this.
• ACC levies: Your first ACC invoice usually arrives 12–18 months in, based on earnings declared in your first tax return. Budget for this.
• Annual leave: Employees accrue four weeks' leave per year. When they take it, you pay their normal wage — but you also often need cover. Build a leave reserve.

The 90-Day Cash Buffer Rule

Once your business is cash-flow positive, aim to build a buffer equal to 90 days of fixed costs (rent, wages, subscriptions). This gives you three months to respond if a major client delays payment or a slow season hits unexpectedly.

Getting a Cash Flow Review

A chartered accountant or business advisor can set up a cash flow model tailored to your business and tax position in about two hours. If you are spending more than a few hours a week worrying about whether you can make payroll, that session will pay for itself in the first month.

Looking for an accountant or business advisor who works with new NZ companies? Find one in your region via FreshFirms.