Take control of your business finances with our guide to cash flow forecasting

Cash flow is the money moving in and out of your business. Knowing what’s coming in and what’s going out helps you avoid surprises. A cash flow forecast shows you what your finances might look like in the future, usually over the next 3 to 12 months. This is especially useful if you’re planning to grow, taking on funding, or dealing with seasonal changes.

Poor cash flow is a major reason why small businesses fail. Forecasting can give you time to prepare for challenges before they happen.

Why cash flow forecasting matters

A forecast helps you:

• plan growth with less risk. You can see if you have enough cash to hire staff, buy stock, or open new locations
• avoid shortfalls. Spot potential gaps before they cause problems
• talk to lenders or investors. Show you understand your finances
• manage seasonal changes. Prepare for quieter months or busy peaks.

Gather your data

Start with information you already have.

• Cash inflows - all the money coming into your business. This might include customer payments, grants, loans, or investments.
• Cash outflows - all the money going out. This includes wages, rent, supplier costs, tax, and loan repayments.

Look at your past 6 to 12 months of bank statements and invoices. This will help you see patterns.

Build your forecast

Choose a time frame. Most small businesses use a monthly forecast for 12 months. In a spreadsheet or simple accounting tool, list your:

• opening balance - the cash you have at the start of the month
• expected inflows - how much money you expect to come in
• expected outflows - how much money you expect to go out
• closing balance - opening balance + inflows – outflows.

If the closing balance is negative, it means you’ll run out of cash unless you take action.

Create a rolling forecast

A rolling forecast is updated regularly, usually every month. When a month ends, you add the next month to the forecast so you’re always looking 12 months ahead.

This helps you:

• keep your numbers accurate
• react quickly to changes
• always plan a year into the future.

Prepare for shortfalls

If your forecast shows a cash gap coming, you can:

• delay spending. Put off non-essential purchases
• speed up payments. Ask customers to pay faster, or offer early-payment discounts
• reduce costs. Negotiate with suppliers or cut unnecessary expenses
• access funding. Arrange a short-term loan, overdraft, or investment before you need it.

Acting early means you’re solving problems before they become urgent.

Use your forecast to guide decisions

Your cash flow forecast is not just a document, it’s a decision-making tool.

Use it when you:

• plan big purchases or projects
• decide when to launch new products
• review prices or payment terms
• negotiate with lenders or investors.

Example in action

A small café in Brighton notices from its forecast that January and February will be quiet months. By spotting this early, they run a marketing campaign before Christmas to sell gift vouchers. They also delay buying new furniture until spring, when cash flow is stronger. As a result, they avoid dipping into their overdraft.

Final thoughts

Cash flow forecasting helps you take control of your finances. By tracking inflows and outflows, updating regularly, and acting early, you can grow with confidence.

It doesn’t have to be complicated. A simple spreadsheet and monthly updates can make a big difference. The more you practise forecasting, the better you’ll get at predicting challenges and making smart choices for your business.

More support

As one of the biggest payment providers in the world, our partners Worldpay can help you take control of your payments. With them your get paid fast. Money goes into your account the next day which supports a healthy cash flow.

With Worldpay Dashboard you can view and compare sales trends daily, weekly and monthly. You can also check your settlements and reliably forecast available funds. All of which would help you to build and maintain your cash flow forecast. It comes at no extra cost to Worldpay customers, and you can access it on your laptop, mobile or tablet.

Explore Worldpay

For more support with cash flow and payments, check out our articles on how to deal with late payments, and setting payment terms and reviewing your pricing.

For a more in depth understanding of cash flow management, check out this online course on managing your cash flow efficiently.