Cash Flow Forecast with Template

What is a Cash Flow Forecast?

A cash flow forecast will assist any small business in finding out the projected balance in the bank account at any given time. This is essential for small businesses owners to plan growth or lack of cash.

Cashflow forecasting may be required if you look to investors or banks for investment, loans or overdrafts. It is also used as part of a business plan.

It may also be necessary for Management regularly to assist them in business decisions. Even if you are a sole trader, you may find the forecast a helpful tool.

The easiest way to produce a regular cash flow forecast is to use accounting software. QuickBooks includes a 24 month forecast tool within their software.

At the end is a free template download, example and instructions for use.

Cash Flow Diagram

Below is a cash flow diagram showing some of the transactions to include in the report.

Cash Flow Diagram

The left shows the income or revenue. This is made up of sales, cash receipts, interest and any other income.

The right shows all the expenditure for the small business including, bills, loans, direct debits, wages, taxes and dividends. The bills will include the cost of sales and most general business overheads.

Cash Flow Projection

Cash flow forecasts are generally prepared for a year. If your business is struggling financially, it may be worth completing a weekly, quarterly or monthly.

A monthly projection may show a positive balance at the month-end, but weekly projected cash balances may show a negative balance for one or two weeks during the month.

If you are aware of financial problems, it is easier to try and avoid them. In that case, you could take several measures, including putting more money into the account, extending an overdraft, or delaying payment or purchase.

If you are looking to expand your business in the future, you may decide when the money will be available to do this. 

Difference between Cash Flow Forecast and Profit and Loss

Cash Flow Forecast example

It is different from a Profit and Loss or a Balance sheet, as it shows the cash paid into or taken out of the business in a given month. Some of the differences are:

  • Includes payments on both P&L and Balance Sheet, e.g. Fixed Assets and Stock, which are not included on the Profit and Loss.
  • You may give or receive credit; the payment or receipt may, therefore, be in a different month from the Profit and loss. An example is you raise a sales invoice in March, but payment is not received until June.
  • There may be regular Direct Debits for fixed amounts, but the actual costs on the bills entered in the P&L may differ.
  • May make dividend payments after the dividend date.

Disadvantages of a Cash Flow Forecast

Although for some companies a cashflow forecast is an essential tool to plan the year ahead, for a small business this might not be the same. A small business with little expenditure, might be a waste of time and reduce the time for earning income.

An example is a self-employed plumber who has regular work and therefore regular income. His expenditure is minimum as he has no rent to pay and parts he purchases for each job. Therefore as long as he prices the work at the correct rate, he should always have money in the bank account.

How to prepare for a Cash Flow Forecast

When creating a forecast you will need to be as realistic as possible.

You will need to know several pieces of information these include:

  • Opening Bank Balance
  • Customer Receipts and invoices
  • Purchase of stock or Fixed Assets
  • Business Overheads
  • Dividend payments
  • Tax Payments
  • Loan finance to be either paid in or repaid

If you are VAT registered the amounts will include VAT, the VAT payment will also be added.

We will look at each of these in more detail to make up the figures for your cash flow forecast.

Opening Bank Balance – The opening bank balance is available from either the statements or online banking. Enter this figure as the starting point.

Customer Receipts and invoices (income)- Some of the figures will need estimating. It may help to set up a detailed spreadsheet showing when you expect to receive cash.

A good starting point is from the sales invoices and entering them when you expect to receive payment. It will help to look at revenue from the previous Profit and Loss (Income Statement) to track variations during the year.

Purchase of Stock or Fixed Assets. If you sell stock items, you will need to enter the cost of the stock, don’t forget any credit terms you may be offered. An example is the business purchases stock in January but pays in February. The cost is entered in February.

Forecast for any fixed asset expenses; these may include computers, furniture, equipment and machinery.

Business Overhead Costs– These might be easier to do as often they are paid by direct debit and are a fixed amount per month. Fixed overheads may include rent, gas, electricity, rates, telephone.

Add any variable expenses including, salary, stationery, business expenses, pensions, advertising and general business expenses.

Dividend Payments – If you are a Limited Company you might pay the shareholders dividends, it might be monthly or annually. Post the transactions when you expect to make them.

Taxation Payments – There are several different taxes that a business might need to make payments for including, Corporation Tax, PAYE, NI and VAT. Enter the estimated figures when they are due.

Loan Finance Costs – If you have a loan enter the amount due each month. If during the period of the cash flow forecast you want to take out a loan enter this figure and any repayments due.

The easiest way to calculate most of the figures is to look at the bank statements, Profit and Loss and Balance sheet. Using a good accounting package will help in obtaining the figures, especially for money owed from customers.

It is worth taking a look at the following packages:


Cash Flow Forecast with TemplateCash Flow Forecast with Template

Sample Projection for 12 months.

Cash Flow Forecast example

The sample above shows that the company started with £10,000 of investment. At the year-end, £5030 will be in the bank. Therefore if the company hits all its targets within the first year, a small amount will be available in the bank.

It is worth spending time each month looking at the forecast and comparing it to the actual cash. Differences can be spotted, and you can then adjust any future figures that may be necessary.

12 Month Cash Flow Forecast Template

Our template is in three sections, the first is total income then total expenses, the last section shows the net cash flow.

Income – Expenses = Net cash flow

The download for our easy to use 12-month Forecasting template is at the end of this page. It is easy to use, by following the instructions below.

Instructions for use

Free cash flow forecast template

Open the cash flow forecast template and update the “1 year” to the year you are completing, you may also wish to add the business name. An example is Cash Flow Forecast 2021/21 for ABC Computers.

The next task is to change the months. If you are planning to complete the template for 12 month period, start with the first month; you can either continue to type each month in the row or click on the first month and drag the bottom right-hand corner of the cell to month 12. It will automatically change each heading.

If you require a weekly forecast add the week commencing dates in each column.

To set up the chart of accounts change the income 1, 2, 3.. to suit your business, for example, sales of hardware, Consultancy, Computer repairs… This is all the revenue accounts.

Next update the expenses – Exp 1, 2, 3.. to your expenditure, for example, wages, loans, utilities, cost of sales and general overheads.

In cell C32, enter the opening bank balance.

You are then ready to start adding the weekly or monthly figures. Remember to add the revenue or expenditure in the week or month you expect it to happen.

An example is that the business issues a sales invoice in January, but the customer is a slow payer expected in the bank in March. The figure would, therefore, be entered in March.

All the monthly balances are automatically calculated month by month. Once complete it is worth checking that the monthly balances are what you expect.

Download Free Forecasting Template

By downloading the template, you agree to our licence agreement.

Further information is available at start-up loans.

Cash Flow Forecast Conclusion

A projected cash flow forecast is a financial report that calculates the future bank balance of the business. It is produced for a 12 month period but can be weekly, monthly or quarterly.

To create a forecast you will need to look at the actual figures for income and expenditure from a previous period and estimate revenue and expenses in future months.

The best way to create the model is by downloading our cashflow forecast template or creating a worksheet in Excel.

If you are creating the financial report for investors or a bank it is worth seeking the advice of an accountant.

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