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Cashflow forecasting

Cashflow forecasting can help you plan how much money you'll need, when you'll need to borrow money and how much available cash you're likely to have at a given time. Cashflow forecasts are often needed to get finance or funding for your business.

Accurate cashflow forecasting can help you:

  • predict peaks and troughs in your cash balance
  • work out when you can take on additional financial commitments
  • avoid overtrading
  • identify other cashflow problems

You might not need an accountant to handle your cashflow forecasts, though professional advice can be useful.

Forecasts should be reviewed and updated regularly as your circumstances change. Legislation, interest rates and tax changes will all have an impact on your cashflow forecast.

Carrying out a cashflow forecast

A 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. The forecast usually includes two columns - for 'forecast' and 'actual amounts' - and is usually done for a year or quarter in advance.

There are different ways of setting out a cashflow forecast. But it will normally be based on your past performance and include:

  • receipts
  • payments
  • total of receipts minus payments, with negative figures shown in brackets
  • opening and closing bank balance

Most accounting software can help you present your cashflow forecast, and you can update your projections easily if necessary.

Visit Business Gateway for advice on cashflow management and a cashflow projection spreadsheet.

If you're setting up a new business, visit Business Gateway for help and advice on financial forecasting. You can download a business plan checklist and a business plan template.

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