See how we forecast your cashflow

As with any business transaction, the key to a good cashflow forecast is to be honest with yourself and realistic about what the future holds. Try to reflect reality and stick to a few rules as follows:

  • Keep it simple our cashflows consist of just 4 sections. Assumptions, inputs, workings and reports. On a complex business, we might split these up between margin and overheads, for example, but generally, any more than that and they become impossible for others to navigate and even harder to update.
  • Keep it short Unless you’re looking at large infrastructure, we’d suggest your maximum reach should be 3 years. It depends on what you’re using the forecast for and who is going to rely on it. The longer the forecast, the less accurate you’ll be.
  • Keep it realistic In your profit and loss account, make sure you base your forecast on a systematic view of expected orders, payments and overheads. Its not about a finger in the air and a little bit of hope.
  • Keep it conservative When forecasting debtor days (how quickly your customers pay), stay on the conservative side. If they normally pay in 90 days, assume it’ll be that in the future and set yourself a target, if you need to, to manage it down within a realistic timeframe.
  • Keep your model integrated If going for borrowing or investment, make sure the model you present to lenders & investors is fully integrated with your projected profit forecast and your balance sheet. That way, if you need to make changes, you don’t need to start again.

If this doesn’t make much sense to you, don’t worry. Just get some professional help – and soon!