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How to Create a Cash Flow Projection

As we discussed in our last blog, developing a cash flow plan has many benefits. It provides valuable insight, measures your progress and gives you a clear financial picture.  

 It can show you that you need to cut overheads, find new investment, or spend time generating sales or you may be considering expanding into new markets, investing in new products, moving to a bigger location, or hiring new staff. Having accurate cash flow projections will help you make informed decisions.

We want to help you with your cash flow projection, so we’ve focused this week’s blog on how you can do so on your own!

Decide How Long You Want to do Your Cash Flow Projection

Cash flow planning can cover anything from  weeks to months to years. Plan as far ahead as you can accurately predict. If you’re already established, you might have  predictable sales and data from previous years. If you’re a new business, you might not have a huge amount of data – so the further out you go, the less accurate your predictions will be.

Don’t worry too much if you can’t plan far ahead. Your cash flow forecast will change over time. As things change, or you get more exact estimates, you can update your projection.

List All Your Income

For each week or month in your cash flow forecast, list all the money you have coming in. Have one column for each week or month, and one row for each type of income. (see template below) 

Start with your sales, adding them to the appropriate week or month. You might be able to predict this from previous years’ figures, if you have them. Put the figures in for when you know clients will pay invoices, or bank payments will clear. You want to know what will be in the bank. 

Also remember to include income, such as:

  • Tax refunds
  • Grants
  • Investment from shareholders or owners

Add up the total for each column to get your net income.

List All Your Payments

Now you know what’s coming in, what do you have going out? For each week or month, make a list of all the money you’ll be spending, for example:

  • Rent
  • Salaries
  • Raw material
  • Software/apps
  • Bank loans, fees and charges
  • Marketing and advertising spend
  • Tax bills

Once you’ve listed everything you spend, add up the total for each column to get your net expenses.

Now you have your cash flow!

You can then keep a running total, from week to week, or month to month, to get a picture of your cash flow forecast over time.

Here is an example of a simple cash flow projection.

cash flow projection

If you would like to set up your own cash flow projection I have included a link below for a template.

Cash Flow Projection

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