Sample cash flow forecast

What is a cash flow forecast?

Anticipating cash flow is an essential part of good business management. The cash flow forecast shows, over a given period, how much money will be going out and how much will be coming in. Outgoing sums are referred to as disbursements, and incoming sums as receipts.

The projected cash flow plan is not the only projected financial table. It must be accompanied by the following tables:

• The provisional financing table: this establishes the provisional financing plan;
• The projected income statement: generally drawn up over a 3-year period, it includes projected sales and expenses, and forecasts the company's net income;
• The projected balance sheet: this brings together a number of elements, such as personnel costs, taxes, working capital requirements and so on. It enables the entrepreneur to see whether his project is viable, and to plan in advance the solutions to be put in place according to the results obtained.

Why draw up a cash flow forecast?

Cash flow forecasts help you keep a close eye on the financial equilibrium of your company or business, and anticipate the financial movements that will keep it in good health. By providing a rapid overview of the situation, the cash flow forecast enables you to quickly rectify any problems and avoid even greater difficulties.

This financial table is also useful when the entrepreneur decides to make an investment. Thanks to the cash flow forecast, he can see the impact of this investment on his cash flow, and choose the ideal moment to invest.

Thanks to the extended view of disbursements, the entrepreneur can also choose to reduce certain costs to improve results. He can anticipate more difficult periods, and avoid situations that would be difficult to get out of, in the event of default, for example.

Ideally, a cash flow forecast should be drawn up for a maximum period of one year. Beyond that, it risks being less precise, and therefore much less reliable.

How do you draw up a plan?

The cash flow forecast consists of two main parts: cash receipts and cash disbursements.

Sample cash flow forecast

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Each column of the table corresponds to a month of the year, and each line to a cash item. Try to be as complete as possible, and list all expected cash receipts.

First of all, there are customer receipts, corresponding to paid invoices. Their amount, as well as the amount of all other receipts, must be shown inclusive of all taxes in the cash flow forecast.

These customer receipts can be sorted in various ways, for example by VAT rate, by customer type (private or business), by payment method or by frequency (recurring versus one-off receipts).

In addition to these customer invoices, there are other types of receipts which will join the ranks of the company's cash inflows. These include subsidies, loans, contributions to partners' current accounts or capital, repayments of tax credits such as VAT or apprenticeship tax credits, and fund-raising.

Disbursements

Below the cash receipts table is the cash disbursements table. Here again, the columns correspond to the different months covered by the cash flow forecast, while the rows are linked to the different disbursement items.

One of the most frequent cash outflows for a company is supplier expenditure. For better visibility, these disbursements need to be classified: they can be sorted by supplier, by payment term or by product type.

Another expense item is remuneration, which includes salaries as well as compensation for internships, for example.

To these disbursements must be added the various social security charges, taxes and charges linked to the running of the business, such as rent, but also electricity, gas, water and telephone bills, fuel costs if the company owns one or more vehicles, various insurance policies, as well as the remuneration of service providers (chartered accountants in particular) and the budget allocated to communication (advertising campaigns, flyers, etc.).

How to avoid unpleasant surprises?

Once you've drawn up a list of your cash receipts and disbursements, certain precautions need to be taken to avoid errors of assessment that could put the company in difficulty.

First of all, you should always anticipate unforeseen expenses: equipment out of service that needs to be replaced, for example, will result in a cash outflow that won't dip your cash flow if you've set aside enough margin to deal with this type of contingency.

Customer payment terms and any delays in payment must also be taken into account, as must supplier payment terms. These various delays can have a considerable impact on your monthly cash flow, and can thwart your forecasts if you're not careful enough.

All expenses, no matter how small, must be taken into account. Underestimating them because they seem insignificant can get you into trouble in the long run. Once added up, these expenses are often not as insignificant as they once seemed.

The projected cash flow plan needs to be updated regularly, to reflect new cash inflows and outflows as they occur in the life of your business. If this financial table remains exactly as you planned it even before you launched your business, it's probably because you haven't really updated it. In fact, it's very rare for things to go exactly as planned.  

Finally, it's a good idea to draw up several cash flow forecasts, from the most optimistic to the most pessimistic, to avoid any unpleasant surprises that could jeopardize the business.