Managing company cash flow in Switzerland: method and example

The essentials of cash flow management

Managing cash flow means forecasting money coming in and going out on the dates when it will actually move. Today’s bank balance is not enough: you need to know which payments are already committed and which receipts you can realistically expect.

• Use a weekly forecast covering thirteen weeks for near-term decisions.
• Record receipts on their likely payment dates, rather than the date of sale.
• Include VAT, social security contributions, taxes, investments and loan repayments.
• Update your assumptions and assign each action to a named person.

Why profit is different from your bank balance

Profit measures the accounting result over a period. Liquidity measures the money available. They develop differently.

A service invoiced in September and paid in November can contribute to profit before the cash reaches your bank. Conversely, a loan increases cash without creating revenue. Repaying loan principal reduces cash without being an operating expense.

Buying a machine illustrates the same distinction. Payment may leave the bank immediately, while its cost is spread through the income statement as depreciation. A revenue and expense budget therefore does not replace a schedule of receipts and payments.

Build a thirteen-week forecast

Thirteen weeks is a practical horizon, not a legal requirement. It shows upcoming commitments in enough detail to act. Add a monthly view covering twelve months for seasonal changes and investments.

Start with available bank and cash balances. Identify restricted funds, foreign-currency accounts and confirmed credit facilities separately. Financing you hope to obtain is not money already secured.

Next, list outstanding customer invoices and their likely payment dates. For new sales, use the expected delivery, invoicing and settlement timetable. Do not simply copy budgeted revenue into forecast receipts.

Add outgoing payments: suppliers, net salaries, social security contributions and insurance, rent, VAT, taxes, interest, loan repayments and investments. For a sole proprietorship, also include planned private drawings without treating them as business expenses.

Opening balance + receipts − payments = closing balance. Each week’s closing balance becomes the next week’s opening balance.

Example: spotting a cash shortage before month-end

This illustrative Swiss SME example uses expected actual payments. VAT and social security payments appear in the relevant rows; do not add the same amount a second time.

The company ends the month with CHF 19,000 but falls to CHF 6,000 in week 3. If CHF 8,000 of receipts expected in week 2 arrive after week 4 instead, the low point becomes negative CHF 2,000 in week 3, without additional financing.

The forecast makes this pressure visible early enough to check receivables, reconsider the investment timetable or discuss financing. Looking only at the month-end balance would have hidden the problem.

Improve collections and the operating cycle

Invoice as soon as your contractual milestones allow. Check the recipient, purchase-order reference and supporting documents requested. An invoice held up in a purchasing department will not be resolved by an automatic reminder sent to the wrong person. Our article on invoicing in Switzerland covers the information your invoices need.

For long projects, negotiate deposits or milestone payments before work starts. Sort invoices by due date and follow a consistent reminder process. Do not treat a disputed receivable as a certain receipt.

Review inventory and work in progress too. Buying early at an attractive price can consume more cash than it saves in expenses. Working capital requirements explain the money tied up in this operating cycle.

Karpeo, an accounting firm in Geneva, can help reconcile your outstanding invoices, expenses and payment deadlines. Our outsourced CFO service supports cash-flow forecasting and financial decision-making.

Manage outgoing payments without shifting the problem

Review uncommitted purchases, little-used subscriptions and investments you could postpone. Compare the immediate saving with the effect on operations. Cutting expenditure needed to deliver an important customer’s order may make matters worse.

Negotiate due dates with suppliers before payments become overdue. A written agreement is preferable to extending a deadline unilaterally. Keep wages, contributions and taxes visible in your forecast even while discussing instalment arrangements.

A credit card, lease or loan changes the timing of payments; it does not remove the cost. Compare the duration of the need, interest, security and future commitments. Financing should address a cash timing gap you understand without indefinitely concealing a loss-making business.

Regular expense monitoring helps address recurring causes instead of postponing the same payments every month.

Establish a weekly review and action thresholds

Each week, replace the elapsed forecast with actual movements. Explain significant differences: postponed sales, late receipts, forgotten expenses or new decisions. Add another week to the forecast horizon.

Set a cash reserve suited to unavoidable costs, customer payment terms and seasonality. There is no universally correct number of months. Test both late customer payments and a fall in activity.

Assign responsibility for following up a customer, approving an order, speaking to the bank or postponing a purchase. A cash flow statement helps explain past movements; it complements the forecast rather than replacing it.

If there is a risk of insolvency, management must act promptly. Article 725 of the Swiss Code of Obligations (CO) requires a corporation’s board to monitor solvency and take appropriate measures; the rules apply by analogy to an LLC. Read about capital loss and over-indebtedness when the difficulty goes beyond a temporary timing gap.

Bring your main payment deadlines and latest accounts to Karpeo so we can identify the information available and the work needed to support your decisions.

Frequently asked questions