Creating a Simple Cash Flow Forecast

Apart from fulfilling legal requirements, one of the main reasons for keeping your books in order is so that you can make financial decisions about your business. Are you going to be able to make a large purchase in a certain month? Do you have enough cash available to pay salaries? If a supplier offers you a large discount for buying your order earlier, do you have enough cash to be able to take advantage?

You will need to set aside some time to set up a forecast. You may be able to do this on your computerised system, if you use one, otherwise set up a spreadsheet or simply create a table on a large sheet of paper.

Decide on the length of time the forecast is to cover; 6 months, a year. Note: you may decide to forecast over weeks instead of months once you’ve become accustomed to this procedure.

Create a wider column for details, then narrower ones for each month.

In the wider column, title the rows. Start with Income: sales, other income, total income (A). Then Expenses: cost of sales, salaries, rent, advertising, office supplies and so on. A row for total expenses (B). Finally, Net Profit/Loss (C) – which is Total Income (A) minus Total Expenses (B), Cash at Start (D) and Cash at End (E).

Jan      Feb      March


Other Income

Total Income (A)

Cost of Sales


Office Supplies

Total Expenses (B)

Net Profit/Loss (C)

Cash at Start (D)

Cash at End (E)

Use the information you’ve recorded in your bookkeeping system for preceding months and some reasonable guesswork to help calculate the values to enter in the columns. If your business has seasonal variation, remember to reflect this in the figures you enter. The figures become less accurate as time goes on, which is why it is a good idea to adjust them weekly (monthly as a minimum) as new information comes to light.

Round figures up and keep things as simple as possible. If you try to record too much detail, it becomes complex and you’re less likely to use the cash flow you’re creating. The purpose is to give you an idea of whether you have enough income in your bank account to pay the purchases and, if you don’t, you will be able to do something about it before it’s too late.

Cash at Start (D) is taken from the figure (or estimated figure) in your bank account at the start of the period. Cash at End (E) is calculated as D + C.

E is then carried forward as D in the next period.


Keep your forecast table simple, group different expenses together.

Keep the figures as realistic as possible.

Make the forecast a working document that can be updated easily.


  • Keeping your books in order will allow you to make clear business decisions
  • Start a forecast system either by hand or computerised showing income and outgoings
  • Adjust figures weekly to keep forecasts up-to-date
  • You may have to make realistic estimates
  • Keep the table simple and group different expenses together

Apr 16, 2015