Last reviewed: 29 September 2026 · Reviewed by IFM's qualified accountant
It will not be perfect. Its value comes from explicit assumptions, frequent updates and early warning, not false precision.
What should you know about choose the horizon and period?
Use weekly columns for the next 13 weeks when payroll, tax or supplier pressure is close. Add a monthly 12-month view for investment, seasonality and tax planning.
Start at the latest reconciled bank balance. Show overdraft or facility availability separately so cash is not overstated.
If the business has several accounts or currencies, consolidate carefully and identify restricted balances.
What should you know about build the receipts section?
List receipts by customer or reliable category. For issued invoices, use expected payment dates informed by actual behaviour, not invoice due dates alone. Mark disputed and concentrated balances.
For future sales, begin with confirmed orders and contracts. Add weighted pipeline only in a clearly labelled scenario, not the base cash balance as though it were certain.
Include VAT correctly. A cash forecast uses bank amounts, while revenue reports may exclude VAT. Avoid mixing the two.
What should you know about build the payment section?
Start with payroll, PAYE and National Insurance, VAT, Corporation Tax or Self Assessment, rent, finance, insurance, software and committed supplier payments. Add capital expenditure, dividends, drawings and loan repayments separately.
Use contractual payment dates and realistic behaviour. Do not push suppliers beyond agreed terms invisibly; show any planned negotiation as an action.
Include one-off annual payments that are easy to miss. Review direct debits and prior bank statements for completeness.
What should you know about tax is a timing item?
Taxes often create the largest periodic outflows. Link forecast dates to the VAT account, payroll calendar, company accounting period and personal Self Assessment obligations.
Estimate amounts from current records and update after each return or payroll. Keep a tax-reserve account where useful, but include its balance and restrictions accurately.
Use the Deadline Finder for standard first accounts, first confirmation statement and Corporation Tax dates. For VAT, payroll, personal tax and other obligations, check the tax deadlines calendar and your official records.
What should you know about calculate the running balance?
Opening cash plus receipts less payments gives closing cash for the period. The next column begins with that closing amount.
Highlight the lowest projected balance and the first date cash falls below the minimum operating level or facility limit. That date defines the action window.
Check formulas across the full sheet. A single omitted row or broken reference can give a reassuring but false result.
What should you know about add three scenarios?
Create base, downside and upside cases. The base should reflect the most supportable timing; downside can delay receipts, reduce sales or include a cost shock; upside can show genuine opportunities.
Do not make all assumptions worse simultaneously without explanation. Link each scenario to identifiable risks such as one customer delay, a hiring decision or slower conversion.
Record trigger points. If a key invoice is not approved by a date, move to the downside action plan rather than waiting for the bank balance to fall.
What should you know about separate profit from cash?
Revenue can be recognised before the customer pays. Stock can use cash before sale. Loan receipts increase cash but are not profit; capital repayments use cash but are not an operating expense. Depreciation reduces accounting profit without a current cash payment.
Explain these differences to users. A profitable forecast does not guarantee cash, and a temporary cash increase from borrowing does not prove the business model works.
What should you know about improve collections?
Issue accurate invoices promptly with purchase orders, acceptance evidence and payment instructions. Confirm the invoice reached the right person. Follow up before and after due dates.
Prioritise large, overdue and disputed balances. Assign each action and date. Consider deposits, staged billing or direct debit for future work where commercially appropriate.
Do not assume every overdue invoice is a collections failure; delivery disputes and unclear scope may need operational resolution.
What should you know about control payments without damaging the business?
Distinguish discretionary, deferrable and committed spending. Stop low-value expenditure before delaying essential suppliers indiscriminately.
Talk to suppliers and lenders before breach. A negotiated schedule protects relationships better than silence. Understand interest, covenant and personal-guarantee consequences.
Directors of a company approaching insolvency should obtain professional advice. Cash forecasting becomes part of creditor-protection and governance, not only planning.
What should you know about funding decisions?
A forecast shows how much funding is needed, when and for how long. Match the facility to the cause: a short timing gap differs from persistent operating losses or long-term equipment investment.
Allow time for lender due diligence. GOV.UK states a business plan and financial forecasts are commonly needed for finance; a forecast built on unsupported sales will not withstand review.
Model interest, fees and repayment inside the forecast before accepting funding.
What should you know about weekly update?
Roll the forecast forward each week. Replace estimates with actuals, preserve prior versions and compare predicted with actual closing cash. Investigate timing and amount variances.
Update actions at the same time. The forecast is a management process, not a file sent once.
After several cycles, use observed customer payment and cost patterns to improve assumptions.
What should you know about one-afternoon build order?
Hour one: reconcile opening cash and list fixed payments. Hour two: load customer receipts and supplier commitments. Hour three: add taxes, payroll and one-offs, calculate the running balance and test formulas. Hour four: build downside scenario, agree actions and schedule weekly review.
Keep the model understandable. A robust simple forecast with named assumptions is better than a complex workbook only one person can operate.
See management information and consultancy for the relevant service page. Use the Deadline Finder for standard first accounts, first confirmation statement and Corporation Tax dates. For VAT, payroll, personal tax and other obligations, check the tax deadlines calendar and your official records.
What should you know about questions to challenge?
Which receipts are contractually due, which depend on acceptance and which are only pipeline? Which customers have paid late before? Are refunds, returns or retention amounts included?
Have all payroll taxes, VAT, Corporation Tax or Self Assessment amounts and dates been checked? Are finance repayments, annual renewals and owner withdrawals visible?
What action is available before the lowest cash point, who owns it and by what date?
What should you know about forecast controls?
Protect formula cells, use input colours and add checks that opening and closing balances roll correctly. Keep a version issued each week and a short change log.
Reconcile actual bank balances before updating. Do not force the forecast to match the bank with an unexplained plug.
What should you know about communicating the forecast?
Lead with headroom, lowest point, variance from last week, major assumptions and required decisions. A lender or board should be able to trace the funding need to receipts and payments.
State what is excluded and how taxes were estimated. Where uncertainty is material, show a range rather than one falsely exact date.
When cash becomes critical?
Move to daily monitoring, freeze non-essential commitments and obtain advice. Directors must consider creditor interests when insolvency is probable.
Keep contemporaneous decisions and forecasts. Early, evidenced action creates more options than waiting until a payment fails.
What should you know about final sense check?
Compare forecast receipts with sales capacity and forecast payments with contracts and prior bank activity. Confirm the closing balance independently from the formula chain.
Ask what event would make the forecast wrong tomorrow. Add that event to the weekly watch list, with an owner and response.
What should you read next?
Management accounts, small-business KPIs and management information services.
What do people also ask about this topic?
What should you know about choose the horizon and period?
Use weekly columns for the next 13 weeks when payroll, tax or supplier pressure is close. Add a monthly 12-month view for investment, seasonality and tax planning.
What should you know about build the receipts section?
List receipts by customer or reliable category. For issued invoices, use expected payment dates informed by actual behaviour, not invoice due dates alone. Mark disputed and concentrated balances.
What should you know about build the payment section?
Start with payroll, PAYE and National Insurance, VAT, Corporation Tax or Self Assessment, rent, finance, insurance, software and committed supplier payments. Add capital expenditure, dividends, drawings and loan repayments separately.
What should you know about tax is a timing item?
Estimate amounts from current records and update after each return or payroll. Keep a tax-reserve account where useful, but include its balance and restrictions accurately.
Which official sources support this guide?
- https://www.gov.uk/write-business-plan
- https://www.gov.uk/government/publications/college-management-accounts-good-practice-guide/management-accounts-good-practice-guide-for-colleges
- https://www.gov.uk/running-a-limited-company/company-and-accounting-records
General guidance, not advice for your situation.
