Frequently Asked Questions

How do I put together a cashflow forecast?

A cashflow projection shows when you actually expect money to flow in and out of your business. It is a forecast, usually for the year ahead, set out month by month.

The first section is ‘Receipts’ which is the anticipated money coming into the business from sales, loans, grants, capital introduced or VAT repayments. For the sales figures, you need to estimate how long it will take to collect the money from your customers from the date you issued the invoice.

The ‘Payments’ section shows all the money that you pay out on bills, purchase of stock, wages, personal drawings, loan repayments, VAT return balances etc. in the month that you make the payment.

The third section, which is the ‘Balances’ section, shows the monthly balances (receipts minus payments) and the cumulative balance carried forward. Where payments exceed receipts the figure is shown in brackets.

It is easier to complete a cashflow projection if you complete the payments section first for costs such as rent and rates, wages, telephone, electricity, as you know that these will be monthly or quarterly. For the other costs, predict when they will occur. Then fill in the sales figures in the receipts section, estimating what your sales will be based on your market research, but remember to allow for seasonal fluctuations, if your business if affected by these.

There will probably be payments (e.g. stock) that are directly connected to your level of sales (variables) and these will have to be filled in. Once everything has been entered into the cashflow, total the monthly receipts and payments and subtract the payments figure from the receipts figure. This will give you your balancing figure for that month.

When you first start trading the opening balance will be nil but your balancing figure for the first month will be entered in the cashflow as the closing balance for that month and carried forward as the opening balance for the next month. Thereafter, the balance from the end of each month will be the opening balance for the next month.

A cashflow projection allows you to anticipate your business financial needs, indicates how much personal income the owner can take out of the business and whether the business is meeting its costs.

Download our cash flow forecast template here

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