Working it out
- Bank balance. Add up all your business accounts.
- Tax owed. VAT you have charged and not yet paid over. PAYE, UIF and SDL taken from pay and not yet paid. Provisional tax, if it applies to you.
- Bills due. Supplier invoices, salaries, rent and loan repayments due within 30 days.
- Subtract. Take the second and third away from the first.
VAT you charge customers belongs to SARS, less the VAT you paid on your own purchases.
An illustration
The figures are invented to show the arithmetic. They are not what any business should expect.
| Bank balance | R150 000 |
| VAT owed | R35 000 |
| PAYE, UIF and SDL owed | R12 000 |
| Bills due in 30 days | R58 000 |
| Available cash | R45 000 |
The bank shows R150 000. R45 000 is yours to spend.
Read it against your own situation
- Last month. Is available cash growing or shrinking?
- Your bank balance. How far apart are the two?
- Your next 30 days. Does it cover what is due before customers pay you?
What a change could be revealing
| The signal | It could be revealing | Check | You could |
|---|---|---|---|
| Much lower than the bank balance | Tax has built up unpaid, or large bills fall due soon | Tax owed and bills due, listed by date | Set tax money aside as VAT comes in |
| Negative | You are relying on money not yet received to pay what is due | When customers usually pay, against when bills fall due | Ask suppliers for a later date, or chase what you are owed, before the due date |
| Bank balance steady, available cash falling | Tax or bills are building up behind the balance | Tax owed and bills due, against three months ago | Find what changed and pay the oldest first |
| High just after a large invoice is paid | A one-off receipt may be covering ongoing costs | Compare with an average month's cash in | Read runway using the average month, not the good one |
Try it
Write the four figures on one page. It takes about ten minutes.
Questions people ask
Which tax dates matter?
PAYE is due on the 7th of the following month. VAT is usually due every two months, on the last business day of the month after the period. The tax and company deadline reminders tool emails you before each one.
Should I use this figure for runway?
Yes, if you can. Otherwise use the bank balance.