Cashflow Forecast Example and Principles

Cashflow forecasting enables you to predict peaks and troughs in your cash balance, whether it's calculated monthly, weekly or daily. Cashflow forecast are, for example, ideal for borrowing money from banks and calculating how much surplus you have available loan repayments; they're also essential for companies which rely on sales for their income and do not receive a standard cashflow each month, as a cashflow forecast can calculate the average surplus available from a selection of previous cashflow forecasts.

Cashflow forecast allows you to identity the sources and amounts coming into your business and the amount of cash given out over that period, leaving you with a surplus at the end. Normally, two columns can be used, listing actual amounts for each element and "forecast" amounts (predictions/expectations).

Normally, your cashflow forecast should list:

  • receipts
  • payments
  • excess of receipts over payments
  • opening bank balance
  • closing bank balance.

However, the forecast can include as many as elements as you feel necessary. It's imperative to cover every income into your business and every outcome to develop a realistic forecast.

The cashflow forecast will start with an ideal forecast before actual estimate as input. For example, if you required a surplus of £5000 at the end of the month this would be your forecast and you would then calculate the forecast for each individual element in the "forecast" column of your sheet (not the "actual" column). The original forecast amount must be practical and realistic, however, to allow your business to meet its target easily.

You can find a variety of resources and even a cashflow forecast example from sites like Businesslink.gov.uk to help you get started, including a step by step guide to designing your own individual forecast for your business needs and what you should include.

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