Cash flow forecasting

Cash flow is king when you’re contracting, self-employed or running a successful small business. Here’s where you’ll find information on how to get it right.

Forecasting when money will come in and out will help you plan for the future. Being able to predict peaks and troughs helps you avoid financial difficulties.



It’s also a vital business planning tool. Use cash flow forecasts to plan for expansion and growth without overstretching your resources.

What is a cash flow forecast?

A cash flow forecast is in essence a cashbook that projects you or your business’s income and outgoings for any given period in the future, eg week, month, quarter or financial year.

For each period, it lists:

• your projected starting account balance
• your predicted income
• your estimating outgoings, eg bills, salaries, raw materials
• your projected ending account balance
• any money left over.

It’s typically presented as a spreadsheet, but many contractors, sole traders and small businesses use accounting software and work with their accountants or bookkeepers to ensure greater accuracy. 

A cash flow forecast is only as valuable as the information and detail put into it.

Predicting income

This needs careful thought. You’ll have to make an informed judgement call on how much income you think you’ll generate.

Include three variations of your predicted income:

• A pessimistic estimate.
• A realistic, or most likely, estimate.
• An optimistic estimate.

You’ll be better prepared for different scenarios — and if you’re seeking capital, you can show investors and bank managers you’re not just planning for the best-case scenario.

If you are keen to understand more about Cashflow, reach out, we are here to support you.