Cash Flow Forecast template

What is a Cash Flow Forecast?

A Cash Forecast is an estimation of the money you expect your business to bring in and pay out over a period time. It should reflect all of your likely revenue sources (like sales or other payments from customers) and compare these against your likely business expenses (like supplier payments, premises rental and tax payments).

If you’re applying for a Start Up Loan, we require a 12-month cash flow forecast because, while these figures will no doubt change over that trading period, this is a good period of time for you – and us – to see how sustainable your plans are.

This file includes a separate tab with guidance on how to use the cash flow forecast template, as well as some useful hover-over tips and messages on the template itself to support you as you work through. For your ease, this file includes a blank Personal Survival Budget template, which you must also submit with your application. These two templates are automatically linked together to reflect where any shortfall in your personal budgeting may need to be made up by drawings from your business. The file also includes a Business Plan template, which is required for your application.

Remember, you don’t have to use our cash flow forecast template – particularly if you have already created a Cash Forecast. However, if you are starting from scratch, we recommend using our template because it is designed to make it as simple as possible for you to complete. Another benefit of using our template is that it includes all of the right information that our Loan Assessment team requires from you to make a fair and informed lending decision.

Please note, the downloadable template should open on any device with a document viewer and editor but for the best user experience, we recommend editing this template on a desktop.

Why is a Cash Forecast important?

Even if you decide not to proceed with a Start Up Loan application straight away the cash flow forecast template is an essential business document for helping you keep on top of your finances. While the actual performance of a business will likely deviate from the projected cash flow, this is still an important document to have in place as part of managing your business. There are several benefits you’ll gain from creating and regularly updating a Cash Forecast.

A Cash Forecast tool:

• Is great for planning your business activities and resources
• Ensures your business activities are correctly aligned with each other
• Supports you in making sensible, realistic decisions for your business
• Gives you greater control over your business finances
• Allows you to better understand your business performance
• Helps you plan for the future

How do I complete my Cash Forecast?

A Cash Forecast is made up of three key sections:

1. Revenue – money coming in

This section is where you list any money that you have coming in to the business such as product or service sales, equity or other investments and your Start Up Loan. The number of items you include will depend on your business model, but a typical revenue section includes between three and six items.

You add all of these sources together to figure out your total income (A).

If you use our free the cash flow forecast template (see the link above), this will be automatically calculated for you.

2. Expenses – money going out

This section is where you list any of the expenses your business incurs, like your premises rental, staff wages, council tax, supplier costs, marketing and promotional expenses etc. You’ll need to think about costs that do not occur on a regular monthly basis, like V.A.T. which is only payable every quarter. Don’t forget to include things like your own salary, Start Up Loan repayments, or specialist expenses you are likely to incur. Again, the number of items you include will depend on your business model, but a typical expenditure section can be anywhere from 10 to 20 line items.

You add all of these sources together to figure out your total expenses (B).

If you use our free cash flow forecast template (see the link above), this will be automatically calculated for you.

3. Net cash flow – the balance

This final section is the difference between your total revenue (A) and your total expenses (B). e.g. “total income (A)  –  total expenses (B) = Net cash flow”

If this figure is negative, it means that you are anticipating your expenses will be greater than your revenue in that period; conversely, if the figure is positive, it means you are anticipating your revenue to be greater than your expenses and to deliver a profit.

If you use our free cash flow forecast template, your net cash flow for each month and for the year as a whole will be automatically calculated for you.

Our top tips for creating your Forecast

These tips have been prepared by our Business Advisers and loan assessment team to help you understand some of the key things that will strengthen your application:

Be realistic in terms of how many sales you expect to make

While it is great to be ambitious for your business, it’s important to be realistic. Particularly in the early stages of trading, you may find that you aren’t able to make as many sales while you’re focusing on building up awareness about your product or service. It’s always better to make conservative estimates and over exceed your targets, than find yourself over committed or under prepared.

Make sure you understand the difference between revenue and expenditure.

• Revenue, or income, is any money your business generates. In a product-based business, this is likely to be made up of the sales of different products. You may like to include separate line items for your individual products or product categories, particularly if each product contributes a significant amount of revenue.
• Expenses, or costs, are the items you’ll need to pay for in order to produce and/or deliver your products or services, promote and manage your business.

Remember that some of your costs will be recurring costs and others will be ad hoc.

• A recurring cost is one that doesn’t change over the course of the forecast. For example, your premises rent, insurance and Start Up Loan repayments etc.
• An ad hoc cost is one that changes according to your needs. For example, supplier costs, material costs, venue hire, printing and travel expenses etc.

Plan for seasonality and base your figures on a range of typical scenarios (like quiet or busy periods)

Seasonality doesn’t affect everyone in the same way. For example, if you’re starting a business in an area that has a booming tourist economy in the summer months but is very quiet during winter, this should be reflected in your forecasted sales figures and costs. But even if seasonality doesn’t affect you in this way, every business goes through quiet periods (with less sales) and busy periods (with more sales). Depending on your fixed and variable costs, this may create more or less pressure on your cost base during this period.

Think about the promotional activities you’ve got planned and the sales you expect these to generate.

If you expect one of your promotional campaigns to deliver a high volume of new sales during a key month, you should try and reflect this in your numbers. Equally, if there are certain periods where you won’t have a large marketing budget in place, think about the impact this is likely to have on your sales.

Don’t forget to include the following items in your cost calculations:

• The salary you will require from the business - If you will not be earning any other forms of income while you start and grow your business you are likely going to need to draw on some of your business earnings to support yourself. The minimum salary you require needs to be included in your forecast as one of your expenses, along with any other staff salaries. Use our Personal Survival Budget guide and template to help calculate this.
• Your monthly Start Up Loan repayments - If your application is successful, you will be required to start making your first monthly payment soon after you draw down your Start Up Loan and it’s important this cost is reflected in your cash flow forecast. To calculate the value of your likely monthly repayments, check out our Loan Repayment Calculator.