1. What Is a Cash Flow Forecast?
A cash flow forecast is a financial tool that helps predict the amount of money coming into and going out of your business over a specific period. It helps you understand whether you’ll have enough cash to meet your financial obligations.
2. Why Use a Simple Cash Flow Forecast?
- Monitor cash availability
- Anticipate shortfalls in advance
- Support budgeting and planning
- Strengthen funding or loan applications
- Make informed financial decisions
3. Basic Components of a Cash Flow Forecast
- Opening Balance: The amount of money at the start of the period
- Cash Inflows: Expected money in (e.g., sales, investments)
- Cash Outflows: Expected expenses (e.g., rent, salaries, inventory)
- Net Cash Flow: Inflows minus outflows
- Closing Balance: Total cash remaining (Opening Balance + Net Cash Flow)
4. Simple Monthly Cash Flow Forecast Example
| Month | Opening Balance | Inflows | Outflows | Net Cash Flow | Closing Balance |
|---|---|---|---|---|---|
| January | £2,000 | £5,000 | £3,500 | £1,500 | £3,500 |
| February | £3,500 | £6,000 | £4,000 | £2,000 | £5,500 |
| March | £5,500 | £4,500 | £4,800 | -£300 | £5,200 |
5. How to Create a Simple Cash Flow Forecast
- Choose a time frame (monthly is common)
- List all expected income sources
- List all regular and variable expenses
- Subtract outflows from inflows to get net cash flow
- Add net cash flow to opening balance to calculate the closing balance
6. Tips for Accuracy
- Base forecasts on realistic estimates
- Consider seasonal variations
- Include one-time and recurring expenses
- Update regularly with actual figures
7. Tools You Can Use
- Microsoft Excel or Google Sheets
- Online accounting software (e.g., QuickBooks, Xero)
- Free downloadable cash flow templates
- Manual pen-and-paper trackers for micro businesses
Frequently Asked Questions
What is a simple cash flow forecast?
It’s a basic financial plan showing how much cash is expected to come in and go out over time.
Why do I need a cash flow forecast?
To ensure your business can pay its bills, manage growth, and avoid unexpected shortfalls.
How often should I update a cash flow forecast?
Monthly is ideal, but update more often if your cash position is tight.
Can I use a cash flow forecast to get a loan?
Yes, lenders often require a forecast to assess how you’ll manage repayments.
What’s the difference between cash flow and profit?
Cash flow tracks money movement, while profit is income minus expenses over time.
What if my forecast shows a negative cash flow?
Prepare in advance—cut costs, delay expenses, or seek short-term funding.
Conclusion
A simple cash flow forecast is one of the most powerful tools in your business toolkit. It doesn’t have to be complex—just clear and consistent. By understanding where your money is going and when it’s coming in, you’ll build confidence in your financial planning and avoid unpleasant surprises.