Cash Flow Forecast Calculator

Why every small business needs a cash flow forecast

More businesses fail from cash flow problems than from lack of profitability. You can be making a profit on paper and still run out of cash — if your customers pay late, if you have a large tax bill due, or if you invest heavily in stock before the sales come in.

A cash flow forecast shows you in advance when your cash balance will be tight, giving you time to act — chase invoices early, arrange an overdraft, delay a purchase, or accelerate a sale.

Income vs profit

Cash flow is about when money actually hits your bank account, not when you raise an invoice or make a sale. If you invoice a client in January but they pay in March, your January cash flow is zero from that client even though you earned the revenue in January.

The danger months

Watch out for:

• January — Self Assessment tax bill due 31 January, often a surprise for new sole traders
• April — Payment on account due, VAT quarter end for many businesses
• Quiet trading periods — seasonal dips that coincide with fixed cost payments

How to improve cash flow

• Invoice immediately — don't wait until the end of the month
• Shorten payment terms — 14 days instead of 30
• Chase overdue invoices early — use our Late Payment Calculator to calculate interest
• Negotiate longer payment terms with suppliers
• Build a cash reserve — aim for 3 months of expenses in the bank

Cash flow vs profit

Profit is the difference between revenue and costs over a period. Cash flow is the movement of money in and out of your bank account. A business can be profitable but cash flow negative — and vice versa. Both matter, but cash flow keeps the lights on day to day.