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Posted: Wed 10th Jun 2026
Last updated: Wed 10th Jun 2026
30 min read
A cash flow forecast helps you estimate how much money will come into and leave your business over a future period.
It shows whether you're likely to have enough cash to pay bills, wages, suppliers, tax and other costs. This guide explains how to create a simple forecast, what to include and how to keep it updated.
Many small businesses are profitable on paper but still run into pressure because cash doesn't always arrive when costs are due.
You might have a strong sales month, but if customers pay late, you have to buy stock upfront or a tax bill lands at the same time as payroll, your bank balance can still feel tight.
That's why a cash flow forecast is so useful. It gives you an early warning system. It helps you see what's likely to happen to your cash before the problem becomes urgent.
You can start with a simple spreadsheet or template. Once the basic structure is in place, the most useful habit is keeping it updated.
Quick summary
A cash flow forecast helps you estimate how much money will come into and leave your business over a future period.
It shows whether you're likely to have enough cash to pay bills, wages, suppliers, tax and other costs.
This guide explains how to create a simple forecast, what to include and how to keep it updated.
A cash flow forecast is an estimate of the money you expect to come into and go out of your business over a future period.
It usually shows:
opening cash balance – the amount of money in the business at the start of the week or month
cash coming in – money you expect to receive from sales, invoices, loans, grants or other income
cash going out – money you expect to spend on bills, wages, suppliers, tax, VAT, loan repayments and other costs
net cash flow – cash coming in minus cash going out
closing cash balance – the amount of cash left at the end of the week or month
A cash flow forecast can be weekly, monthly or both. Weekly forecasting helps you manage short-term pressure. Monthly forecasting gives you a wider view of the year ahead.
The important point is that a cash flow forecast focuses on when money actually moves. It isn't based only on when you make a sale or send an invoice.
For example, if you send a £2,000 invoice in June but the customer usually pays 30 days later, the cash should be shown in July, not June.
It also helps to understand how a cash flow forecast differs from other financial tools:
Cash flow forecast – shows when money is expected to enter and leave the business
Profit and loss forecast – shows whether the business expects to make a profit over a period
Budget – shows planned income and spending over a period
All three are useful, but they answer different questions. A cash flow forecast is mainly concerned with whether you'll have enough money available at the right time.
Cash flow forecasting helps you make better and more confident decisions. It's much more than a boring admin task or something to create when a bank asks for it.
A forecast can help you:
spot weeks or months where cash may run low
plan for VAT, tax and payroll
decide whether you can afford stock, equipment, marketing or recruitment
check whether late payments could create a problem
decide whether you need finance before cash becomes urgent
understand whether your growth plans are affordable
give lenders, grant providers or investors a clearer picture of the business
A forecast helps you move from "I think we'll be fine" to "I can see what will happen if sales are late, costs rise or a big bill lands."
That's key because cash problems often build without fanfare. You might feel comfortable after a good sales month, then find the money's already committed to VAT, supplier payments, loan repayments or wages.
A forecast makes those commitments clear to see. It gives you time to act earlier, whether that's chasing invoices, delaying non-essential spending, negotiating terms with suppliers or speaking to an accountant.
A useful cash flow forecast just needs to show clearly what's coming in, what's going out and what that means for your closing bank balance.
Here are the main sections.
Your opening cash balance is the amount of money in your business bank account at the start of the forecast period.
This is your starting point. Each week or month, the closing balance becomes the next period's opening balance.
For example, if your closing balance at the end of June is £4,500, your opening balance for July is £4,500.
Cash coming in means the money you expect to receive. This might include:
sales paid immediately
customer invoice payments
deposits
grants
loans
investment
owner contributions
tax refunds
other income
Show the cash in the period when you expect to receive it, not necessarily when you've done the work.
If you complete a project in May, invoice in June and expect payment in July, the cash belongs in July's forecast.
Cash going out means the money you expect to spend. This might include:
rent or workspace costs
utilities
software and subscriptions
supplier payments
stock or materials
wages and salaries
employer National Insurance and pension contributions
marketing
insurance
professional fees
travel
equipment
loan repayments
tax, VAT and other HMRC payments
one-off costs
Try to include both regular costs and occasional costs. One-off payments are easy to forget, but they can have a big effect on your bank balance.
Net cash flow is cash coming in minus cash going out for that period.
If more cash comes in than goes out, the number is positive. If more cash goes out than comes in, the number is negative.
A negative month isn't always a crisis. It may happen because you've bought stock, invested in equipment or paid an annual bill.
But negative cash flow repeating over time needs attention – especially if your closing balance keeps falling.
Your closing cash balance is your opening balance plus your net cash flow.
This is the number to watch most closely. If it drops too low, the business may struggle to meet bills even if sales look strong.
The right forecast period depends on how predictable your income and costs are, how much cash buffer you have and what decisions you need to make.
Most small businesses should start with a 12-month monthly forecast. This gives a useful view of the year ahead and helps you plan for quieter periods, tax bills, equipment costs and seasonal changes.
If your cash position is tight, you should also use a weekly forecast for the next eight to 13 weeks.
A weekly view is more useful when the timing of cash matters day by day.
Start-ups and newer businesses: You may need a shorter forecast because you have less past data to work from.
Seasonal businesses: You should usually forecast at least 12 months so you can see both busy and quiet periods.
Businesses applying for finance: You may need a 12-month or longer forecast, depending on what the lender or funder asks for.
But the principle is simple – forecast as far ahead as you can make a reasonable estimate, then update it as real figures come in.
A practical starting point is:
weekly forecast for the next eight to 13 weeks
monthly forecast for the next 12 months
review weekly when cash is tight
review monthly when cash is stable
Your forecast doesn't have to be perfect. A realistic, regularly updated forecast is more useful than a detailed spreadsheet you create once and then ignore.
Weekly and monthly forecasting are both useful, but they serve slightly different purposes.
This is useful when:
cash is tight
the business has large supplier payments
customers often pay late
you pay wages weekly
the business has seasonal peaks and troughs
you need to manage short-term pressure
Weekly forecasting shows timing more clearly.
A monthly forecast might show that March looks fine overall. A weekly forecast might show that the first week of March is difficult because payroll and rent leave the account before three customers pay their invoices.
That detail can help you act earlier. You might chase invoices before the end of February, ask for a deposit on new work or delay a non-essential payment until later in the month.
This is useful when:
you want a wider view for planning, or a clear 12-month view
costs are broadly predictable
you need to plan for tax, VAT, investment or recruitment
Monthly forecasting is usually easier to maintain and works well for planning. It helps you see larger patterns, such as quiet trading periods, annual renewals or a tax bill due in a specific month.
For most businesses, monthly forecasting is enough for planning. Weekly forecasting is better when cash is tight or payment timing is uncertain.
Estimating income can feel difficult, especially if sales vary from month to month.
Rather than trying to guess perfectly, you're looking to use the information you have and avoid building a forecast on wishful thinking.
Start by looking at what has happened before. Useful figures include:
average monthly sales
seasonal peaks and quiet periods
repeat customers
recurring revenue
average order value
typical times for when invoices are paid
If you've been trading for a while, past sales can show patterns. You may know that January is quiet, September is strong or certain customers always pay near the end of the month.
If you're a new business, you may have less data. In that case, use confirmed orders, realistic sales targets and any evidence you've gathered from test sales, pre-orders or market research.
Separate income into three groups:
Confirmed income: Work agreed, order placed or sales already made. Include it in the forecast.
Likely income: Strong chance of being won but not confirmed. Include carefully, or discount the amount.
Possible income: Early-stage opportunity or uncertain sale. Leave it out or include only in an optimistic scenario.
Don't treat every sales opportunity as guaranteed cash. Start with what you've confirmed, then add realistic assumptions for likely income.
A forecast can look healthy if you include every possible sale, but it may not help you prepare for what's actually likely to happen.
Cash flow forecasting is about when money arrives, so consider:
when customers normally pay their invoices
late-payment patterns
which customers pay deposits or staged payments
who pays by card or pays immediately
delays with payment processing
If a customer usually pays 30 days after getting the invoice, build that into the forecast. If they often pay 10 days late, build that in too.
If you take deposits, show the deposit when you receive it and the balance when you expect the customer to pay it.
It can help to create three versions of your income forecast:
Cautious forecast
Expected forecast
Optimistic forecast
The cautious version is often the most useful for cash flow because it shows what happens if sales take longer or customers pay late.
For example, your expected forecast might assume that most customers pay invoices within 30 days.
Your cautious forecast might assume that some pay after 45 days. This helps you see whether the business can cope with slower payment.
Practical example:
A graphic designer expects £6,000 of work in July. They've already confirmed £3,000 and the customer usually pays within 14 days. £2,000 is likely but not yet agreed. £1,000 is possible.
A cautious forecast might include the confirmed £3,000 only.
An expected forecast might include the confirmed £3,000 and part of the likely £2,000.
An optimistic forecast might include all £6,000, but the designer shouldn't rely on that version when making spending decisions.
Costs are often easier to estimate than income because many of them repeat. The main task is making sure you include both regular costs and the costs that happen less often.
Fixed costs are costs that stay broadly the same each month. Examples include:
rent
software
insurance
salaries
subscriptions
loan repayments
phone and internet
These are usually easier to forecast because you know how much they are and when they're due. Add them to the week or month when you expect the money to leave your account.
Variable costs rise and fall with sales or activity. Examples include:
materials
packaging
stock
freelancer costs
delivery
payment processing fees
sales commissions
If sales increase, these costs may increase too.
For example, if you're a product business that expects higher sales in November, you may also need to buy more stock in September or October.
If you're a service business that expects more client work, you may need more freelance support.
The forecast should show the cash effect of growth, not just the extra income.
One-off and annual costs are easy to miss because they don't happen every month. Examples include:
equipment
repairs
website work
professional fees
insurance renewals
yearly software renewals
trade show fees
training costs
Add them to the month when the payment is due.
If you know a large annual cost is coming, you may also decide to set money aside each month.
For example, if an annual software subscription costs £1,200, you might treat it as a £100 monthly commitment in your planning, even though the cash leaves the account once a year.
Build in likely increases where you can. Review:
suppliers' price increases
rent reviews
wage increases
energy costs
new subscriptions
finance costs
If you know a supplier is raising prices from September, add the higher cost from September onwards. If you're planning to hire staff, include the full cost of employment, not just the advertised salary.
This section gives general guidance on what to include in a cash flow forecast.
Tax rules and deadlines can vary, so check HMRC guidance or speak to an accountant if you're unsure.
Tax, VAT, loan repayments and payroll are some of the most important items to include because they can create large cash outflows.
They're also easy to underestimate if you only look at day-to-day trading costs.
If your business is VAT registered, include expected VAT payments in the month they're due.
If you collect VAT from customers, treat that as money you're holding temporarily for HMRC rather than money available for you to spend.
According to GOV.UK, VAT returns are usually submitted every three months. The online submission and payment deadline is usually one calendar month and seven days after the end of the accounting period.
Your forecast should include:
expected VAT due to HMRC
the month the VAT payment is due
any VAT refunds you expect to receive
a separate VAT line if that makes the forecast clearer
Some businesses also use a separate VAT savings pot. This can lessen the risk of accidentally spending money that you'll later need to pay to HMRC.
Self Assessment is relevant for sole traders and some business owners.
If you expect to pay Self Assessment tax, add the payment to the month it's due. For many people, this means planning ahead for January and July.
According to GOV.UK, payments on account are usually due by midnight on 31 January and 31 July. Each payment is normally half of the tax owed for the previous year.
These payments can put pressure on you if you don't forecast them early. If you're a sole trader, it's sensible to estimate your tax throughout the year and set money aside regularly.
Corporation Tax is relevant for limited companies.
Include your expected Corporation Tax payment in the month it's due. Don't wait until the bill arrives to plan for it.
For companies with taxable profits of up to £1.5 million, GOV.UK says Corporation Tax must usually be paid nine months and one day after the end of the accounting period.
If your company is growing or profits vary, ask your accountant to help estimate the likely payment so you can add it to the forecast.
If you employ people, include wages or salaries in the period they're paid. Also include related payroll costs, such as:
employer National Insurance contributions
workplace pension contributions
PAYE payments to HMRC
bonuses or commission
holiday pay
payroll provider fees
According to GOV.UK, employers usually need to pay their PAYE bill by the 22nd of the next tax month if paying monthly, or the 22nd after the end of the quarter if paying quarterly.
Payroll can be one of the biggest regular costs in a business, so it should be visible in your forecast. Add payroll costs even if you're the only employee or you pay yourself irregularly.
Include the full cash repayment, not only the interest.
A loan repayment often includes both capital and interest. From a cash flow point of view, the full amount matters because that's what leaves the bank account.
Separate loan repayments from other costs so you can see the cash impact of borrowing clearly. Include:
business loan repayments
credit card repayments
asset finance payments
finance agreements
merchant cash advances
director loan repayments, where relevant
Your business may look profitable but still have a difficult month if rent, payroll, VAT and loan repayments all leave the account before several invoices are paid.
This section explains how to create a simple cash flow forecast using a spreadsheet or template.
Decide whether to forecast every week, every month or both.
Start simple. A monthly 12-month forecast is a good first version for many businesses.
Use a weekly forecast if you need a closer view of the next few weeks, especially if cash is tight, you're not sure when payments will land, or you have several large costs coming up.
Use the actual bank balance at the start of the period. If you have more than one business bank account, decide whether to combine them or show them separately.
For a simple forecast, one total opening cash balance is usually enough.
Add the money you expect to receive. This might include:
confirmed payments from customers
realistic estimates of sales
grants, loans or investment
deposits
other income
Put the money in the week or month you expect it to arrive. If you make a sale in June but expect the payment in July, show it in July.
Add the money you expect to spend. This might include:
regular costs
variable costs
tax and VAT
payroll
loan repayments
one-off costs
Put costs in the week or month you expect them to leave your bank account.
For example, if you pay your rent on the first working day of each month, show it in that month. If your insurance renews once a year, show the full payment in the renewal month.
Calculate cash in minus cash out to get your net cash flow. For example:
Cash in = £8,000
Cash out = £6,500
Net cash flow = £1,500
Or:
Cash in = £7,000
Cash out = £9,000
Net cash flow = - £2,000
A positive number means the business received more cash than it spent during that period. A negative number means it spent more than it received.
Add your net cash flow to your opening cash balance. For example:
Opening balance = £5,000
Net cash flow = £1,500
Closing balance = £6,500
Or:
Opening balance = £6,500
Net cash flow = - £2,000
Closing balance = £4,500
The closing balance is the amount of cash you expect to have at the end of the period.
The closing balance for one month becomes the opening balance for the next.
This is what makes the forecast useful. It shows how each week or month affects the next one.
A temporary shortfall can become more serious if you don't recover enough cash in later periods.
Once the figures are in place, look carefully at the forecast and check for:
months where closing cash is low
weeks where several payments leave before income arrives
the business relying too heavily on one customer
large tax or VAT bills
rising costs
negative cash flow recurring repeatedly
You're aiming to spot pressure early. You don't need to panic because one month looks difficult, but you do need to understand what's causing it.
If the forecast shows a possible cash gap, decide what action to take. You might:
chase invoices earlier
change payment terms
ask for deposits
spread annual costs
delay non-essential spending
negotiate terms with suppliers
build a cash reserve
explore finance before cash becomes urgent
speak to an accountant or adviser
The earlier you act, the more options you usually have.
Your cash flow forecast will be most useful to you if you update it regularly.
A forecast you create once at the start of the year will quickly become less accurate. Sales change, costs move, customers pay late and new opportunities appear.
Review your forecast:
weekly if cash is tight
monthly if the business is stable
immediately before big spending decisions
before taking on staff
before applying for finance
before committing to new stock, equipment or premises
If you're using a weekly forecast, set aside a regular time each week to update it. With a monthly forecast, update it once you know the figures for the previous month.
Compare:
forecast income against actual income
forecast costs against actual costs
the dates you expected payment against the dates you were actually paid
closing balance against actual bank balance
This helps you understand whether your assumptions were realistic.
If customers usually pay invoices later than expected, adjust future months. If costs are often higher than forecast, update your assumptions.
Update the forecast for:
late invoices
new sales
changed costs
revised tax estimates
loan or finance changes
new payroll costs
cancelled work
confirmed grant or funding income
Try not to treat the forecast as fixed. It should change as the business changes.
Use these three questions:
What changed since the last forecast?
Does the closing cash balance still look safe?
Do we need to act now to avoid a future cash gap?
This routine keeps the forecast practical, and will help you make better decisions.
If your forecast shows a possible cash shortfall, try to act before the issue becomes urgent.
You might:
chase overdue invoices
ask for upfront deposits or staged payments
review payment terms
put non-essential spending on hold, or do less of it
talk to suppliers about timing
look at invoice finance, overdrafts or short-term finance if suitable
speak to an accountant before the situation becomes urgent
A shortfall doesn't always mean the business is in serious trouble. It might just mean you have to be more careful with how you manage timings.
For example, you may have enough sales in the pipeline but need customers to pay sooner. Or you may need to delay a large purchase until you've paid a tax bill.
Cash flow is about money moving in and out of the business. Profit is what's left over after income and costs are matched over a period.
A business can make a profit but still run short of cash if customers pay late, it has to buy stock upfront or large bills are due before income arrives.
Update it weekly if cash is tight and monthly if the business is more stable.
You should also update it whenever a major assumption changes, such as a new sale, a cancelled project, a late invoice or an increase to costs, a tax estimate or a loan repayment.
A 12-month monthly forecast is useful for planning. A weekly eight-week to 13-week forecast is better for managing cash over the short term.
Many small businesses benefit from using both – a weekly view for the next few months and a monthly view for the year ahead.
Yes, if your business is VAT-registered. Include VAT payments in the month they're due and avoid treating VAT you've collected from customers as spare cash.
You may want to keep VAT on a separate line in the forecast so it's clear when you can expect the payment.
Yes. Include the full repayment amount in the month or week it leaves your business account.
From a cash flow point of view, the full repayment matters because that's the amount of money leaving the bank.
A good cash flow forecast template should show opening balance, cash coming in, cash going out, net cash flow and closing balance.
It should also include rows for tax, VAT, payroll, loan repayments and one-off costs.
The best template is one you can adapt to your business. Remove anything that doesn't apply and add your own categories if you need to.
Not always. Many small businesses can start with a simple spreadsheet.
An accountant can help if your business has complex tax, funding, stock, payroll or growth plans. They can also help you check whether your assumptions are realistic.
Need to cover a temporary cash flow gap or plan for growth? Explore funding options through Enterprise Nation's Funding Hub.
