There is a recurring irony in SME cash flow: the outflows hardest to predict — a breakdown, a late-paying client — get watched closely, while the most predictable ones of all tend to get discovered the week they are due.
What is rigorously predictable
Three recurring commitments, with known dates and estimable amounts:
- Social security contributions: paid between the 10th and the 20th of the month after the work is done. They amount to 23.75% of gross pay on the employer's side, plus the 11% withheld from the employee, which the company passes through.
- Income-tax withholdings: submitted by the 20th of the following month. Money that was never the company's, but passes through its account.
- VAT: under the quarterly regime, the return is filed by the 20th of the second month after quarter-end. It is the largest outflow, and the one that most upsets a month's cash position when it is not planned for.
The problem with quarterly VAT
The quarterly regime is light on paperwork and treacherous on cash flow. The company charges VAT on invoices over three months, that money lands in the account, and for weeks it looks available. It isn't: it is a debt to the state with a date attached.
A company invoicing €100,000 a quarter at the standard VAT rate has, at the end of that period, around €23,000 that is not theirs. If that amount got used to pay suppliers in the meantime, the month it is due becomes a problem — not from a lack of profitability, but from confusing balance with available cash.
The fix is not complicated, and almost nobody applies it: set the VAT aside as it is charged, even if only into a second account, and treat it as already spent.
The months that are always worse
Combining these obligations with the mandatory bonuses, some months are structurally heavier at any Portuguese SME:
- June, for the holiday bonus.
- November or December, for the Christmas bonus.
- May and July, for the annual obligations — the corporate tax return (Modelo 22) by 31 May and the IES annual filing by 15 July, with a possible corporate-tax payment attached.
- Whichever months VAT is due, depending on the regime.
None of these is a surprise. They all show up as one at companies without a 90-day cash flow forecast.
How to plan for this in twenty minutes
A sheet with twelve rows, one per month, and three columns: estimated social security, estimated VAT, and other tax obligations due that month. Fill it in based on last year and correct it quarterly.
It is not sophisticated, and it solves most of the problem, because it turns what feels like the unexpected into what it actually is: a known calendar, visible months in advance.