How to make an accurate cash flow forecast


A cash flow forecast is a useful tool to predict how much money you will have in your business each month.

Basically, a forecast looks at the outgoings and incomings of money into your business. As long as the cash coming into your business is more than the cash going out of your business, your finances should be healthy.

An accurate cash flow forecast is not difficult to achieve as long as you follow a few simple principles. Although a forecast can only be an estimate, it can be reasonably accurate, with the actual figures not deviating significantly.

Sales forecasts

If you have been trading for a number of years, this makes it easier to predict sales. Most businesses have seasonal periods, or other high and slow times of the year for sales. Take this into account when creating sales forecasts.

It is tempting to be overly optimistic about sales. Try to be realistic with forecasts based on likely sales, not wishful thinking.

Record payments when paid

If your business invoices customers, any amount owing is not money held by the business. When creating income forecasts, take into account the date when payment is actually expected. For example, if a customer has received goods or services and an invoice for them, if they have 30 days in which to pay, then record the expected payment 30 days after the invoice date.


Not all expenses can be accurately predicted, but there are regular recurring payments for which you have accurate figures. These will include rent and, to a certain extent, utilities.

When looking at stock purchases, take into account seasonal fluctuations. Many businesses spend more on their stock during the Christmas period, for example.

Unexpected expenses are difficult to predict, but you can set aside an amount based on a percentage of your outgoings. If no unexpected expenses occur, your actual cash flow may exceed expectations.

Regular cash flow projections

Some businesses create cash flow projections monthly, but it is worth considering weekly or even fortnightly forecasts. Regular projections mean that you can anticipate the financial health of your business. If you predict that cash flow will be low during a period, you can prepare for this.

Get help

Many business owners are not financial experts or struggle to find the time to put a forecast in place, which is why it makes sense to outsource business finance to a management accounting service who can create forecasts for you, and make sure that you maintain a healthy cash flow.