A cash flow forecast predicts the money that will go in and out of your business on a day-to-day basis. Because it is based on current cash flow, it is an essential tool for both providing insights on how your business is operating today and helping you plan for the future.
Below we provide a free, downloadable template to help you create your own cash flow forecast, and take you through the steps for using it effectively in your business.
Cash flow forecast template
We have created a template for a 13-week cash flow forecast. Download the forecast template below and populate it with your incomings and outgoings for your own cash flow projections. Make sure you adapt it to the categories that are relevant for your business.
Using the forecast template in three steps
In order to populate the cash flow forecast, you’ll first need to prepare the following information on your business activities:
- Estimated cash inflows such as sales revenue, assets sales and tax refunds
- Estimated cash outflows such as cost of sales, loan repayments and employees' wages
Customise the columns to match your company's inflow and outflow activities.
Input your numbers into the outgoing and revenue section.
We have populated the template above with the imagined cash flow forecast for a fictional SME. For Week 1, the business will just be starting out, so cash received from e-commerce is expected to be low (£2,000), while cash paid out on expenses like utilities and travel is expected to be relatively high (£6,850). The result is an expected closing balance of minus £4,850 for Week 1.
By Week 13 our fictional business should be more established - digital marketing efforts and word of mouth should have a positive impact on e-commerce sales which are expected to reach £15,000. At the same time, expenses should remain relatively stable. The result is a positive cashflow forecast of £5,650 for Week 13.
Using the template for cash flow projections
Remember that a cash flow forecast is exactly that, a forecast. It’s an educated guess based on in-depth knowledge of your business and industry. Forecasts can be carried out over a range of time horizons, for example 30 days or 6 months, but the further ahead you try and predict the less accurate your forecast is likely to be.
Why use a forecast template?
Having a cash flow forecast template can help provide you with structure for quick, easy population. It also saves you time on having to research and understand what data and calculations you need to perform.
It’s important for small business owners to always be prepared for the unknown – especially when it comes to unexpected disruptions to your cash flow. Nick Ford, founder of architectural engineering firm PipSqueak Developments Ltd., knows this all too well.
“Just last month, a client of ours was hit with an insolvency of one of their largest customers,” he says. “This left them with a large outstanding account that will affect their ability to pay us on time.”
Understanding and quantifying the long-term impact of an unexpected event like this is crucial to ensuring the right decisions are made quickly, so your business can weather the storm. For Ford, this meant generating a cash flow forecast quickly to navigate his company through a ”sea change in the inward flow of cash”.
How to create your own cash flow forecast template
Step 1: Create columns for each month you plan to run your forecast for.
Step 2: Down the left-side, list all the categories of incomings and outgoings for your business. For example, online sales, in-store sales, staff salaries and office rental.
Step 3: Next to the relevant category and under each month, input your recurring incomings and outgoings. These are items that you already know about, such as your monthly rent.
Step 4: Populate your expected incomings and outgoings under each month. This will include your projected sales and any additional expenses you think are likely to arise. For example, higher shipping costs due to increased demand or a rise in office rental at the turn of the year.
TIP: To make your projected numbers more accurate, look over your historic sales to identify any patterns, then consider how current and future trends or events might scale these figures up or down.
Bonus tips for cash flow forecasts
Equipped with our cash flow forecast template, or the knowledge to create your own, here are three additional tips when creating and using your own forecast.
Set a realistic time frame
If you’re pushed for time, running a forecast over a shorter period will minimise the amount of data you need to collect and input.
“In an emergency or fast-moving situation, it can be helpful to focus on a 13-week period,” says Joannou, manager at Capital Markets Policy at the Institute of Chartered Accountants in England and Wales (ICAEW). This helps to instil discipline and create focus and it's not so far into the future as to render the forecast less dependable. It means a forecast is faster to create, while still enabling you to gain insights into immediate cash flow risk, so you can take action quickly if required.
Plug into technology
“Forecasting accurately in a limited time is about reducing the amount of guesswork you have to do,” says Ford. This is where technology can help, taking the leg-work out of manual calculations for you.
Ford uses Xero, which he says gives him good historical data about his company’s costs, making forecasting easier and more accurate. Similar tools enable you to create budgets, track incomings and outgoings and compare budgets to expenditure.
A cash flow forecast enables you to quickly see where and when you will likely have a surplus or deficit in your account. This will help you plan when it’s best to pay your business expenses. With an American Express® Business Gold Card, you have up to 54 days to clear your Card balance, so you can keep your money in your business for longer and pay your expenses when it best suits you.¹
- The maximum payment period on purchases is 54 calendar days and is obtained only if you spend on the first day of the new statement period and repay the balance in full on the due date. If you'd prefer a Card with no annual fee, rewards or other features, an alternative option is available – the Business Basic Card.