Start from a reconciled bank position
Use the opening available cash at a defined date and note any facilities or restricted balances separately. A forecast cannot be judged if its starting point is wrong.
Add known receipts and payments by date
Use aged customer balances, payment terms and actual collection knowledge for receipts. Add payroll, HMRC, supplier payments, finance repayments, rent and committed capital spending by likely payment date. Keep VAT and PAYE visible rather than burying them in general overheads.
Separate committed from hoped-for
New sales, disputed invoices and unapproved projects belong in assumptions or scenarios. Show the impact of a late receipt, a stock order or a hire. Do not present one precise cash figure as certainty.
Review the difference every week
Compare forecast receipts and payments with actual bank movements. Decide whether the difference was timing, amount or missing information; update the next version. The forecast becomes more useful as the team learns its bias.
Illustrative example: the bank holds £60,000 today, payroll of £25,000 is due Friday and a customer invoice of £40,000 is expected next Tuesday. The headline month-end balance may look comfortable, but the Friday low point matters. A 13-week forecast should show the daily or weekly timing that makes that pressure visible, then test what happens if the customer pays a week later.
What to check
- Opening bank position and available facilities checked
- Receipts split between confirmed, likely and uncertain
- Payroll, VAT, PAYE, rent, supplier and finance payments on expected dates
- Assumptions and scenario changes visible
- Forecast compared with actual cash at each update
Where to start
A first 13-week view can be built from bank balance, aged debtors and creditors, payroll and tax dates, and confirmed commitments. Improve detail after the timing works.
Further reading: ICAEW: Cash-flow forecasts and inventory.