The most important factors you should consider in your cash flow forecast

Cash flow forecasts provide a prediction of a company’s financial position over a set period of time. These forecasts are usually based on expected incomings and outgoings for the business.


The cash flow allows a business to be able to settle debts, return money to shareholders, invest and battle against financial struggles. Having a forecast in place would allow you as a business owner to mitigate financial barriers and keep the business in a healthy financial position going forward.


In this guide, we are going to consider important factors that you should be including in your forecast.


Predicting sales – For start-up businesses this can be difficult as you have no historic data to base your forecast on. If you have been trading for longer than 12 months, you can utilise the data from the previous year to predict the sales expected in the coming year.


Purchases – You need to consider the purchases the business will make. If you are holding stock, you should look into how much stock you are holding each month and how much this is going to cost the business.


VAT – This should be added to purchases and sales, and will allow for the quarterly tax payment. Excluding this important information could damage your cash flow.


Costs associated with employees – There are many costs associated with hiring that will need to be included within your cash flow forecast. This can include; insurance, training, sickness cover, equipment and more. Take the time to consider the costs associated with each of your employees and factor this into your forecast.


Marketing – One of the costs associated with generating sales is marketing. In order to generate sales (income), you may consider investing more cash into your marketing (outgoing). If you have a monthly marketing budget in place, calculating your outgoings will be straightforward.


Loans – If you have received any loans to support the business, these will need to be paid back. Including repayments within your forecast will prevent any financial surprises and allow you to manage a healthy cash flow.


The team at the SME Centre of Excellence is dedicated to supporting small-medium businesses. If you have any concerns or you’re looking to outsource a certain aspect of your business, the team is here.


Don’t face your business challenges in isolation, reach out to our team today for more support.

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