Importance of A Cash Flow Forecast

We continue our series of getting back to business and pressing the re-set button.

Consistently across various surveys the number one cause of a business failing is lack of working capital and poor cash-flow management.

Staying on top of the moving cash in your bank account is not easy and without a robust cash management system you will not be able to foresee any problems and gaps in the availability of cash.

Right now, there are other issues to consider too.

During this pandemic and its immediate aftermath your turnover may not leap back to past levels and your clients/customers may take longer to pay you compared to previous years.  Also, the additional help via the Job Retention Scheme and other government backed grants and loans are coming to an end in the next couple of months.

Plus, you may need to factor in any delayed or postponed payments such as deferred VAT, Corporation Tax and PAYE and in addition from this month you need to contribute towards the wages of the furloughed workers. So even if your cashflow may look okay in the short term you will need to factor in all the above over the next few months.

Profit is not cash

Sometimes people feel safe in the knowledge that their business is a profitable one and yes this is great news because if the business is not profitable then you have bigger concerns. But profitability alone will not ensure the survival of the business, the ability of the business to pay its bills as they fall due will.

Cash flow looks at the money flowing in and out over a period.  A business may be generating profits but if the customers are not paying on a timely basis then you will not be able to meet your own liabilities on time.  This will cause all sorts of problems and will put your entire business at risk.

How to build a robust cash -flow system


If you struggle to plan, then you are not alone. However, without a realistic monthly budget how can you predict what your sales are and what your expenses will be (including those tax liabilities). We would suggest that you set out the budget within your cloud accounting software but if not at least use a spreadsheet. Make sure that you are not over optimistic about your sales, look at last year and adjust downwards if need be because of the current pandemic.

Regular record keeping

 Keeping your accounting records up to date is vital. Weekly or even daily reconciliations are crucial. This may sound like a big ask but as we have said before – you need have control over your data. Talk to us if this is not something you are used to, and we can provide training or take on that task for you. This way you know exactly what invoices you have raised and what bills you have received which in turn will predict your cash-flow over the next few months.

 Implement a monitoring tool

Whichever system you use, whether it is a complex spreadsheet or an automated time saving cloud product the point is you need a system. Once you have a system you need to review and adjust regularly.  With so much else to do we would suggest that you consider automating this task because otherwise you will not give it the importance it deserves and can be ignored which you cannot afford to do.  We highlight our favourite product below.

Chase your debts

Chasing your late payers promptly and regularly is the way to ensure the cash comes in when expected.  Using an automated invoice reminder can also speed up the payment process. Sometimes people just simply forget to pay or to manage their own cash-flow and will then only pay when reminded.

Try and make it easier to pay you.  If you can offer options, then it makes it easier to settle your debt faster.  Consider bank transfer, credit card options, direct debit options, paying over the telephone etc.

Watch what you spend

 This would form part your budgeting exercise and needs to be regularly reviewed.  Ask if all the overheads are necessary.  Obviously, items such as rent and wages are essential but again you may want to re-examine this over the coming months.  Do you still need the office space you have always had, what about advertising in that magazine you have done each year for the last decade?

 Have back-up finance

 This will give you re-assurance in case there is a shortage of cash, or a growth opportunity came along.  The government backed loans which are a relatively cheap source of finance comes to an end next month. Whilst taking on debt should not be considered lightly, we have suggested that getting agreement for a loan is an important back-up just in case you need it. There are no repayment charges so if you do not need it then great! You can pay it back. But what if in October or November you find that you are short of cash, but the schemes ended in September?

How to automate your cash-flow forecast

It was not that long ago we were spending substantial amount of time with clients running through scenario’s on spreadsheet or a desktop programme to come up with a workable cashflow.  These did a good job but was very time consuming and therefore expensive. But now with cloud technology the emphasis is on affordable solutions which are not draining on cash or time.

We work with fluidly as our preferred App to give you the cash-flow forecast without creating layers of extra work.  This is because it is automatically linked to the cloud software and so can read your data. 

Fluidly has many advantages and here are a few:


  • AI powered cash-flow so it is not just automated but also predictive based on past performance
  • There is no lengthy training involved because it is a plug (into your cloud software) and play App
  • You can see an overview or drill into the details.

  • The forecasts are built line by line reflecting the transactions in your accounts.

  • We believe that keeping on top of your cash is so important that we are offering the Fluidly Starter package to you free (priced at £10 plus VAT per month) so you can see the benefit of automating your cash-flow process. This is will give you a 3-month forecast. If you decide that you like the product then you can upgrade to the Standard Package which will give you a 12 month rolling forecast.


But remember for the software to produce the right results, your accounting records need to be in the cloud and up to date, which means regularly reconciled. Creating a reliable cash flow forecast is your initial step to ensure you enjoy a positive cash-flow and in turn business growth.


Most businesses that fail each year, fail due to poor cashflow – which is why having a clear picture of your financial future is so important. Forecasting your cashflow not only gives you a clearer picture overall about your business and how money moves into and out of it. It also provides an important insight into your company’s financial health and enables you to make faster, more informed business decisions.”….. Sebastian Knudsen from Fluidly

In summary make sure that you understand your business finances over a longer time frame than the ‘here and now’ and you will be better placed to plan the way forward. It is difficult to predict anything with certainty now, but you need to start somewhere.  Use us for any help.

Get in touch if you need help with any of the above.