Forecast Your Cashflow In 5 Steps (for CEOs, MDs and investors)

5 steps to forecasting

your Cashflow.

Essential for all SMEs and startups

Cash is the life and blood of your business. So you should ensure you have visibility of it for (at least) the next 30 days.

The alternative is to fly by the seat of your pants. Which is not recommended.

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A clear picture of your cashflow can save you stress and money and most importantly your business. It can also do the same for your investors.

A forecasting tool can also save you time, and let you get back to running your business!


Step 01What is your bank balance, and what overdraft have you got?

Two numbers which should be clear in your head before you forecast.


Step 02When are your customers

going to pay you?

This is not just about when payments are due but on what date will that money hit your bank account? Direct debits and merchant

payments provide some certainty, otherwise ask your customers to confirm when the payment will be made. You may need to get used

to calling them twice.


Step 03When do you need to pay your suppliers?

Who do owe? How much? When? Do you have pay suppliers on fixed (bi)monthly payment runs? Do you negotiate credit and

payment terms? Do your suppliers call you to confirm payment dates?


Step 04What other payments do

you need to make?

The weekly or monthly payroll, the monthly PAYE / NI return, the quarterly VAT return, etc. These don’t come with credit terms and

are payments which should not be missed.


Step 05Review your cashflow profile

(and take required action)

If you have a hole in your cashflow, expected or not, you now have time to (a) chase another customer, (b) delay a supplier payment, (c) ask your bank for a temporary facility, (d) request funding, or

(e) have the money ready yourself!


Case Study•£75k in the bank ; £25k overdraft facility•£250k owed by customers•£150k owed to suppliers•£57k payroll at end of month•£75k owed to tax man•£2.5k bank charges / interest

So that looks like £40k in the bank?


However, from this profile there isn’t cash in the bank to pay your staff in 28 days time


With a high-level view of this one-page cashflow tool, let’s walk through the 5 steps.


Step 01What is your bank balance,

and what overdraft have you got?

Bank : £75k Overdraft : £25k


Step 02When are your customers going to pay

you?



Step 03When do you need to pay your

suppliers?

Step 04What other payments do you need to

make?



Step 05Review your cashflow profile?


Step 05Take required action

Shareholder advances of £40k lined up.


Step 05Track payments & receipts weekly!

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Economy & Finance

Forecast Your Cashflow In 5 Steps (for CEOs, MDs and investors)