Preparing Cashflow Forecasts

Businesses are facing unprecedented times and cashflow management is crucial. Planning is essential and to have visibility of cash requirements over the coming months. We would recommend preparing the following tools:

1. A 13 week rolling cashflow planning weekly receipts and payments to ensure, on a rolling basis, that the business has adequate resources to make payments – Click here to download our FREE cashflow support sheet

2. A 12 month cashflow forecast to give visibility of the expected resources available and needed to protect the business

We fully appreciate that it is almost impossible to plan from day to day at present, so the idea of a 12-month forecast might seem ridiculous. However, it is important to base projections on the most appropriate assumptions you can make at present and continually update them as facts emerge and the picture becomes clearer.

The 13 week rolling cashflow should be updated on an ongoing basis and as one week finishes, a new week should be added so that Directors always have visibility of the cash requirements for the quarter ahead and can plan accordingly.

How to Prepare Cashflow Forecasts
Here are some simple tips which might help:
• Base everything on assumptions which, if changes, will update the forecasts
• Be prudent
• Be detailed – now is not the time for broad estimates, but specific calculations
• Look at recent receipt and payment records as a starting point to help ensure you don’t forget anything

Some Specific Thoughts
• Collecting debtors – allocate resource to this crucial task and be prepared to offer settlement discounts to collect cash, depending on how urgently you need funds
• Furloughing staff – if this is part of your plan, make sure you reflect this in your cashflow
• Make sure you calculate VAT as part of your workings
• VAT deferral – if you are going to defer the next VAT payment, don’t include it as a payment in your cashflow
• PAYE – if you intend to defer PAYE payments, don’t include them in your cashflow
• Suppliers – prioritise key suppliers and decide which payments are essential. Communication is key, so speak to suppliers if you wish to make arrangements with them

Having prepared your cashflow forecast you will have a sense of whether the business can survive on its existing cashflow or whether additional funds are required. If funds are required, the Government has set up a scheme for banks to be able to lend and 80% of the loan is underwritten by the Government. Further details and timings are awaited (at the time of writing) but this could be a crucial lifeline for businesses. It is reasonable to assume that banks will want to see cashflow forecasts to support applications, which is another good reason to start preparing these now.If any assistance is required, we have the skills and resources to support you and will be pleased to discuss precisely how we can help.


If you have any questions about this article, or anything else, please call 020 7164 6664, or email info@optimacf.com

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