CASHFLOW FORECASTS: 
A SIMPLE GUIDE

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A cashflow forecast looks at the future and predicts how money will come in to and go out of your organisation.

No. A budget plans which sources of income and costs will fall in to which period. Often money does not change hands at exactly the same time as a piece of work is done. A cashflow forecast will map when the money actually changes hands.

Your budget may show that your project is viable ( planned income is more than or equal to expenditure). But, for example, if you receive a grant late you may not be able to pay your employees. This could lead to a very early end to your project.

Looking at the timing of money going in and out is therefore essential.

Cashflows can cover any period of time but are usually done on a monthly, or quarterly basis.

Step 1: Set up a table.

If you have already done a budget you can use the headings for your income and expenditure.

Step 2: Income. Work out when the money is likely to come in. Enter it in the table.

In our example the grant comes in each quarter starting in April.

Step 3: Work out when you will have to pay the bills. Enter it in the table. For example you may have to pay the rent each month, but the electricity bill comes in once a quarter. In our example the insurance premium is paid in one go, you may pay yours each month.

Step 4: Add up your table following the simple guide letters.

Step 5: Look to see if the balance at the bottom (" balance c/fwd") is positive. If the number is close to zero you will have to keep a close eye on the monies going in and out. If the number is a negative amount you will have to plan how you are going to pay the bills, eg. arrange to pay later, arrange an overdraft facility with the bank or chase up any money owing to you.