Tony’s Top Tips: What to Include in a Cash Flow Forecast

Never has cash been more important to SMEs than right now – as focus turns to growth and recovery following the pandemic.

Due to this, forecasting and continually updating cash flow information is crucial.

Forecasting is not only important to support funding applications, but also to ensure you have the capital required to achieve your growth and recovery plans.

Mainstream banks should be your first port of call for business finance. But if you don’t tick all of boxes with them, then BCRS is here to help.

To support loan applications, BCRS will require a cash flow forecast to demonstrate the amount of funding required.

This may seem daunting for some business owners, so we have shared some tips on what to think about and include when putting a cash flow forecast together:

  • Build your cash flow forecast on an Excel spreadsheet – this means it can be updated as and when you have more clarity on what the future looks like
  • Break it down into two parts:

The first part is for the period when the business won’t be trading:

    • Take your last 3 months bank statements and pull out the overheads that you will need to continue to pay over the next 3 months (DDs, salaries, rent, loan and mortgage repayments, HMRC payments due)
    • It is always worth trying to negotiate more favourable terms with suppliers and landlords during this period of disruption
    • Add in receipts from your debtors ledger and spend time actively chasing these debts.
    • Also add in amounts due to suppliers from your creditors ledger
    • Next add in any grants or other government support you are eligible for

The second part is for when the business starts trading again:

    • You need to consider how quickly you will be able to start trading from an operational perspective and also how quickly orders/sales will come back on-line

Once you have completed this forecast it is worth updating this daily when there is more visibility on government support and you have more knowledge of when debtors have paid or are likely to pay and any favourable terms you have agreed with suppliers.

This will then highlight whether there are any additional cash shortages that need to be covered and if this is the case you should get in touch with lenders to see if they will be able to lend you more money to support any additional working capital requirements identified.

Conversely if the cash position improves it may be worth paying off some of your borrowing; particularly if, as is the case with BCRS, they do not charge early repayment fees.

It’s worth spending the time adding in actuals over the next few days and weeks to improve the accuracy of your forecasting.

Click here to submit an online initial application form – it takes less than two minutes.

Leave a Reply

Your email address will not be published.

Fill out this field
Fill out this field
Please enter a valid email address.

Interested in discovering more?

Sign up to receive funding top tips, weekly blogs, a handy checklist for your loan application, event invitations and much more.