Guide

Cashflow management

Cashflow forecasts

Cashflow forecasting enables you to predict peaks and troughs in your cash balance. It helps you to plan how much and when to borrow and how much available cash you're likely to have at a given time. Many banks require cashflow forecasts before considering a loan.

Elements of a cashflow forecast

The cashflow forecast identifies the sources and amounts of cash coming into your business and the destinations and amounts of cash going out over a given period. There are normally two columns, listing forecast and actual amounts respectively.

The forecast is usually done for a year or quarter in advance and divided into weeks or months. The forecast should list:

  • receipts - any money that will come in during that period
  • payments - any money that will go out during that period
  • excess of receipts over payments - with negative figures shown in brackets
  • bank balance at the start of the period
  • bank balance at the end of the period

It is important to be realistic in your forecast - see plan and forecast sales.

You could separate cashflow for business operations from funding cashflow. This will give you a clearer picture of the actual performance of your business, by allowing you to gauge how self-sufficient the day-to-day working of your business is.

If you have an established business, it is often a good idea to base your sales prediction on the same period 12 months earlier.

Download our sample cashflow projection spreadsheet (XLS, 82K).

Accounting software can help you prepare your cashflow forecast, allowing you to update your projections if there's a change in market trends or your business. For more information, see accounting software.

For more information see Invest NI’s tutorial on maintaining a positive cash flow - it will outline actions you can take to manage your cash effectively and provide you with key tips to keep your business financially sound.

You can also watch a video below highlighting how to manage your cashflow and deal with late payments.