A cash waterfall is a weekly, ranked order of payments that releases only the minimum needed to keep trading, stay compliant, and prevent service cut-offs so your runway lasts longer. If you are steering a business in Cardiff, Newport, or Bristol, the safest path is simple: protect revenue continuity and legal standing first, negotiate everything else with dates and amounts, and repeat the cadence every week so Thursday’s pay run is calm, not chaotic.
A survival-ready waterfall keeps the systems that take customer money online, meets statutory duties, and stabilises relationships with banks and landlords while you defer lower-impact costs with structured communication. If you want a guided setup while you read, Total Books Accountants can front supplier and HMRC calls, set the weekly rhythm, and stand up a 13-week cash view in days so you can focus on selling.
Key takeaways
What should I pay first when cash is tight?
Pay the smallest amount that keeps this week’s revenue flowing, legal obligations met, and mission-critical services active before anything discretionary.
How do I stop arguments over who is more important to pay?
Score every supplier on six risks (revenue link, continuity, legal/enforcement, switching cost and lead time, human capital, covenant/bank) using 0–5 points each, total to 30, and pay in descending order.
How do I avoid draining the bank on one large invoice?
Fund only the minimum to maintain service and pair it with a dated plan for the remainder instead of paying the full balance by habit.
When should I call HMRC if I will miss PAYE, VAT, or Corporation Tax?
Call before the deadline, propose Time to Pay, and support it with a 13-week cash forecast, an upfront amount, and monthly instalments you can actually afford.
How often should I run the waterfall?
A fractional CFO will design your cash flow and run the cash collection supervision every week: collections on Monday, approvals on Tuesday, pay run on Thursday, and a short review on Friday.
Who usually sits in Tier 1, Tier 2, and Tier 3?
Tier 1: payroll net pay, energy, internet and telecoms, core SaaS and cloud, payment gateways, critical materials or logistics, and live HMRC commitments. Tier 2: landlord, non-critical SaaS, professional services and suppliers who will accept 14–30 day extensions. Tier 3: discretionary or low-impact items such as office supplies, travel, and paused marketing.
How do I keep suppliers supportive while I delay?
Lead with numbers and dates, ask for part-pay agreements or short extensions, and confirm service continuity in writing the same day.
What triggers an instant reprioritisation?
Statutory demands, claim forms or CCJ threats, licence-suspension emails from software vendors, energy disconnection notices, bank covenant alerts, and Companies House late-filing penalties move the creditor or supplier to Tier 1 until resolved.
Where does a Virtual Finance Director actually help?
A VFD runs the scoring and Thursday file, fronts HMRC and supplier negotiations, keeps lenders calm on facilities and covenants, and drives a collections sprint so Tier 1 is funded by receipts, not hope.
How can I automate reminders and reduce admin?
Use Xero, Sage or QuickBooks with approval workflows, payable reminders and AI capture; add tools like Dext, ApprovalMax, Pleo or Spendesk, and Power Automate or Zapier for nudges, tasks and dashboards.
What is a cash waterfall in day-to-day UK business terms?
A cash waterfall is a live, weekly list that decides who gets paid, how much they get, and why that exact amount is justified, so you stay legal and connected while protecting this week’s sales. The practical flow is straightforward: list what is due, score each item on six risks, calculate the minimum to maintain service for high-impact items, and push everything else out with structured, respectful communication. For example, a Bristol ecommerce team can fund its commerce platform, payment gateway, and warehouse energy in full, part-pay a landlord with a firm follow-up date, and pause low-impact supplies for a fortnight without risking sales.
A cash waterfall differs from a project-finance waterfall because this one is tactical and reset weekly, reacting to real notices like a final demand from an energy supplier, a licence suspension warning from a SaaS vendor, or a bank covenant nudge. Ranking covers both cash-in and cash-out so Thursday’s payments match confirmed receipts rather than wishful thinking.
Book a free 15-minute meeting with one of our expert virtual finance directors and prioritise your cash flow & profitability.
Why do payment priorities decide whether your runway survives?
Payment priorities decide runway because the wrong first payment can trigger a sales outage, a regulatory escalation, or a facility issue that is hard to reverse. Paying the loudest voice rather than the highest-impact item can leave you with a suspended cloud licence or a disconnected warehouse, which kills revenue even if your inbox goes quiet. The right order preserves the systems that collect cash, keeps statutory duties credible, and prevents lenders from losing confidence.
Mistakes that compress runway are paying in full when a part-payment would keep service on, ignoring HMRC letters until additional penalties land, and spreading small amounts across low-impact invoices to create a quieter inbox rather than a functioning business. A scored, weekly process closes those traps and buys you time.
How do you map your obligations before ranking suppliers?
Mapping obligations starts with a clean export of all amounts due from your ledger, enriched with contract facts that change risk, so scores are evidence-based rather than opinion. Renewal dates, notice periods, suspension and termination triggers, retention-of-title rights, and any director personal guarantees on overdrafts or loans belong in the same sheet as due dates and balances. Decision-maker names and direct lines sit alongside each item to speed outcomes.
Data you lift from Xero, Sage or QuickBooks includes the full payables list with due dates and contacts; helpful extras include whether the spend is tied to a recurring contract or purchase order so you can see what repeats monthly. Evidence that improves decisions includes service SLAs, licence terms, landlord clauses, and lien or retention-of-title wording that affects how quickly a creditor can move.
Learn more about why a profitable business may still be starved of cash!
Which risks matter most when deciding who gets paid first?
Six risks determine order because they predict near-term damage if an invoice is not paid: revenue linkage, continuity risk, legal and enforcement risk, switching cost and lead time, human capital risk, and covenant or bank risk. Each factor gets a 0–5 score, totals produce a 0–30 score, and that total drives the tier.
Revenue linkage highlights suppliers that directly control this month’s sales or this week’s customer receipts, such as a payment gateway or ecommerce platform. Continuity risk flags disconnection, suspension, licence revocation, or stockout; dated suspension emails and final demands push scores up. Legal and enforcement risk captures statutory demands, claim forms, or letters before action that start the clock. Switching cost and lead time lift complex SaaS, specialist logistics, or regulated services. Human capital risk keeps net pay and critical contractors near the top. Covenant and bank risk recognises that a missed payment can cause facility withdrawal or a call on a personal guarantee.
Calibration rule of thumb: 20+ is Tier 1, 12–19 is Tier 2, 0–11 is Tier 3, and any fresh legal or suspension notice overrides the maths until it is resolved.
Where does a Virtual Finance Director add disproportionate value?
A Virtual Finance Director adds the most value by owning the weekly cadence, leading HMRC, landlord, utility and key vendor negotiations, maintaining lender confidence, and driving a focused collections sprint so Tier 1 is funded by receipts. Centralising decisions shortens the time from risk signal to action and gives suppliers and banks one calm, consistent voice.
Quick wins in the first month often include fewer ad-hoc payments outside Thursday, clearer supplier communications with dates and amounts, and runway extended by a blend of accelerated receipts and negotiated part-pays. By day ninety you should see smoother customer collections, a signed Time to Pay where appropriate, and a Tier 1 that feels boringly predictable. If that is the outcome you want, book a same-week triage with Total Books Accountants in Cardiff, Newport, or Bristol and arrive with your live list, expected receipts, and any notices.
How can a business automate supplier term reminders, early-settlement prompts and admin-heavy tasks?
Automation reduces missed dates and frees human time for judgement calls, so systems handle nudges and routing while leaders handle sensitive negotiations. Xero, Sage and QuickBooks support payable reminders, approval workflows and scheduled emails; switch them on so due-date alerts go out automatically and only authorised invoices enter the Thursday run. AI-powered capture tools such as Dext or Hubdoc read emailed bills, publish them to the ledger and route them for sign-off, removing manual typing and reducing errors.
Spend management tools like Pleo or Spendesk issue virtual cards with per-supplier limits, which makes it easy to freeze discretionary spending during tight weeks while leaving Tier 1 suppliers untouched. ApprovalMax or native approval rules help block non-critical subscriptions above a small threshold during runway protection. Workflow platforms such as Power Automate or Zapier can push three-day and one-day supplier nudges, generate tasks when risk notices arrive, and colour-code high-risk items in a shared dashboard.
Early-settlement prompts work for savings and relationships. A saved view of suppliers who might accept a small discount for Thursday payment, paired with a Monday 11:00 template that says we can settle for X if you confirm by Tuesday, creates quick wins without phone-tag. On the customer side, embedded payment links, direct debit options, and polite, automated reminders reduce the time between invoice and cash, which is the cleanest way to fund Tier 1.
How do you build your first waterfall in 60 minutes?
Building the first waterfall in an hour is realistic when you focus on what changes decisions. Export the amounts due, mark items that directly protect sales or legal standing, pull notices and contract facts, score each supplier across the six risks, set the minimum to maintain service for Tier 1, draft two short templates for part-pays and extensions, and book the five weekly calendar blocks.
The second half-hour is execution. Call the top five customers to confirm dates, call the two or three Tier 1 suppliers most likely to suspend service, call HMRC if a deadline is at risk, and assemble a Thursday file that funds only Tier 1 minimums. Share the matrix with owners so Tuesday sign-off is fast and factual.
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What keeps the whole system honest and measurable?
Simple weekly indicators keep the waterfall honest: customer collection time nudging down, supplier days sitting where you agreed rather than spiking, weekly net burn easing, and runway in weeks moving flat-to-up. A short Friday variance review compares planned versus actual receipts and payments and adjusts next week’s file accordingly. A brief internal narrative keeps the wider team aligned: sales knows which receipts matter on Monday, operations knows which suppliers need reassurance on Tuesday, and leadership sees runway and risk at a glance.
Local reassurance matters as well. Total Books Accountants is embedded across Cardiff, Newport and Bristol, supporting clients UK-wide by video, and can bring the scripts, the cadence and the lender narrative so you can concentrate on customers and product.
Disclaimer
This article is educational and not legal, tax, or insolvency advice. Statutory demands, winding-up risks, employment matters and landlord issues require qualified professional guidance tailored to your circumstances. If you receive a legal notice or expect to miss a statutory deadline, seek advice immediately.
