Unlocking The Power of a Cashflow Forecast

Do you ever feel like you’re making money but still constantly stressed about bills, payroll, or taxes?  Then you’re not alone.

Welcome to the world of cash flow problems.

A survey in 2024 by Dojo, suggested that an estimated 110,940 UK SMEs were at risk of going out of business due to no cash reserves to support their business operations.

Whatever the size of your business understanding, projecting and protecting your cash flow is one of the most powerful things you can do for your business health.

And no, cashflow is NOT the same as making a profit. You can make a profit but still run out of cash. Check out this Blog for the difference between cashflow and profit.

Cash flow forecasting can be an extremely powerful tool for a business…

So, what Is a Cash Flow Forecast?

Basically, a cash flow forecast is a prediction of how much money will come into your business and how much will go out over a specific period (usually monthly or quarterly).

i.e  Will  you have enough money to cover your expenses?”

How to Build a Simple Cash Flow Forecast

You don’t need fancy software to get started. A basic spreadsheet is enough.

Step 1: List Your Income

• Retainer clients

• One-off projects

• Product sales

• Grants or funding

• Other revenue streams

Make sure you base it on realistic expectations, not hopeful projections. We all have tendency to over-estimate on what sales income we will achieve!

Step 2: List Your Expenses

• Rent, subscriptions, and software

• Salaries or freelance support

• Marketing, ads, and consultants

• Loan repayments

• Taxes and insurance

• Unexpected costs buffer (yes, include a contingency budget)

Step 3: Break It Down By Month

Month	Expected Income (£)	Fixed Costs (£)	Variable Costs (£)	Net Cash Flow (£)
April	5,000	2,000	1,000	+2,000
May	4,000	2,000	1,500	+500
June	3,000	2,000	1,200	-200

Identify negative months as they signal a need to reduce costs, delay spending, or bring in more income.

Why Bother With Cash Flow Forecasting?

Here are some of the biggest benefits:

1. Avoid “Surprise” Shortfalls

Forecasting helps you spot cash gaps before they happen, giving you time to adapt, whether that be chasing invoices, delaying expenses, or lining up extra work.

2. Make Confident Decisions

Thinking of hiring, launching a new service, or investing in equipment? Check the forecast first. If the cash isn’t there, then perhaps it’s not the right time.

3. Improve Your Profitability

Seeing your finances in black and white helps you identify where you’re spending too much or overcommitting resources.

4. Stay Tax-Ready

No more panicking when your taxes and VAT are due. Forecasting allows you to set aside what’s needed now, rather than scraping it together later.

5. Be Taken Seriously by Investors or Lenders

If you’re looking to grow or secure funding, having a clean, clear cash flow forecast shows you run a tight ship and gives them confidence in your business.

Common Mistakes to Avoid

• Overestimating income (especially with late-paying clients!)

• Forgetting irregular costs like insurance, annual subscriptions, taxes due or loan payments

• Ignoring your own salary—yes, you should pay yourself

• Updating it once and forgetting about it—make sure it is a living document

Final Thoughts

1. Most business stress doesn’t come from lack of revenue, it comes from uncertainty. A cash flow forecast gives you control. It lets you plan, breathe easier, and grow sustainably.

2. Aim to have cash reserves of at least 6 months in place

3. Each month put aside a % of income for taxes and VAT.

4. Remember, cash and profits are different things, a business can be profitable, but run out of cash… read my other Blog on Cash v Profit to understand the differences.

5. If numbers aren’t your thing or you just need a second pair of eyes, a freelance business manager (like me 👋) can help you set it up and keep it updated without the jargon overload.