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How to prepare a quarterly cashflow forecast (and why it’s essential for EVERY business)

Whether your business is flush with cash or struggling to make ends meet, a 13-week cashflow forecast is just about the most important financial tool at your disposal.

By projecting your week-by-week bank balance across the next quarter, struggling businesses can see exactly what they need to do in order to cover bills, pay staff and stay afloat.

For businesses in a less perilous position, it can help pinpoint the ideal time to invest in growth, take on new staff or buy new stock.

In this blog post, we’ll look at how cashflow forecasts work, and how you can create your own to give you a clearer-than-ever picture of your business finances…


How a cashflow forecast works

Simply put, a 13-week cashflow forecast shows the money that will flow in and out of your business every week, and how those transactions will affect your bank balance over the quarter.

It’s not an exact science - after all, it’s virtually impossible to predict every single sale or expenditure three months in advance - but it will give you an idea of how much cash you may have available at any given time.

Naturally, your projections for week one and two are likely to be more accurate than for weeks 12 and 13, but this doesn’t detract from the usefulness of the forecast.   

Indeed, a cashflow forecast not only helps you to cover your known costs, it can help you build a resilient buffer against any unforeseen expenditure in the future.


How to create your cashflow forecast

If your business currently uses cloud accounting software like Xero, then you’ll be able to create detailed, accurate and automatically updated cashflow forecasts using add-on applications such as Float and Futrli.

But even if you haven’t made the move to online accounting yet, you can still create a simple cashflow forecast via good old spreadsheet - with no technical expertise required.

Start by creating a new sheet and putting each of the 13 weeks in its own column, leaving the first column of the sheet blank.

Then, into the blank column, add four headings (one per row) - ’Opening balance’, ‘Income’, ‘Expenses’, and ‘Closing balance’.

Start the ‘week one’ column with your opening balance - the amount in your bank as of right now. Then insert the total income you expect to receive this week, followed by the total expenses you know you need to pay.

For a more detailed forecast, you may want to itemise your projected income and expenditure, listing each bill or invoice you need to pay that week. You could also choose to group these figures by supplier or client.

Either way, add your estimated income to your opening balance, then subtract the expenses figure to give you your ‘closing balance’. You can use the formula tool in Excel to do this calculation for you, or just use a calculator.

The closing balance figure represents the expected balance of your bank account if all your income and expenditure payments are made on time.

To complete the spreadsheet, carry this closing balance over to the opening balance of week two, and keep repeating the process until the spreadsheet is filled out.


How to maintain your cashflow forecast

As a minimum, your forecast should be updated once a week. If possible, aim to set a consistent day and time to sit down with it, and make it part of your weekly routine.

To maintain accuracy, you might also want to update the forecast whenever you issue or receive an invoice, adding the future income/expenditure into the week at which you expect payment to be made.

As each week passes, simply update your predicted opening balance with the actual figure, and add another week to the forecast. If your projected balances bear little resemblance to the actuals, try to identify where the discrepancy has occurred, and learn from it going forward.

Maybe you forgot to include a bill that was due for payment, or were hit with an unexpected outgoing. Or perhaps the inaccuracy was the result of a late payment from a client.

If the latter, you may want to re-evaluate any future projections that rely on income from that particular customer….


A helping hand with your forecasts

If you’d like more information about cashflow forecasts, or how a move to Cloud accounting can help you take greater control of your finances, give us a call on 0121 667 3882 or email 


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