Cash Flow Forecasting for Small Businesses: A Simple 13-Week Example

Declan runs a landscaping company in Wexford with three staff. His accounts show a healthy profit for the year. Yet in the week his VAT payment leaves the account, he logs into the bank and sees €800.

Profit and cash are not the same thing. A simple cash flow forecast would have shown Declan that week coming two months earlier, when he still had time to act. This guide shows how to create a cash flow forecast for a small Irish business, with a worked 13-week example built around Irish tax dates.

What a cash flow forecast is (and isn't)

What is a cash flow forecast? It is a list, week by week, of the cash you expect to come in and go out, and the balance you will be left with.

It is not a profit and loss account. Profit counts a sale when you invoice it. Cash only counts it when the customer actually pays. A sale invoiced in March and paid in May helps your profit in March but does nothing for your bank balance until May.

Why 13 weeks? It is short enough to be accurate, because you know your customers, staff and bills for the next quarter. It is also long enough to catch every VAT, payroll and rent date that could cause a problem.

What goes in: money in, money out, opening balance

How to forecast cash flow comes down to three parts.

Opening balance: the cash in your business bank account at the start of week 1.

Money in: customer receipts, entered in the week you realistically expect to be paid, not the week you invoice. If a customer always pays at 45 days, forecast 45 days.

Money out:

• Wages, in the weeks you pay them
• PAYE, PRSI and USC, paid to Revenue monthly
• VAT, paid every two months
• Rent and loan repayments
• Supplier payments
• Director drawings or salary
• Tax such as preliminary tax, in the week it falls due

Use the real Revenue dates. VAT returns cover two-month periods and are due by the 19th of the following month, or the 23rd if you file through ROS. Payroll taxes are due 14 days after the end of each month, or 23 days if you file and pay through ROS. Our guide to your first VAT return explains the VAT side in more detail.

A 13-week cash flow forecast example

Here is Declan's cash flow forecast for the quarter. All figures are invented for illustration.

His regular outgoings are wages of €2,200 a week, rent of €1,200 a month, a van loan of €450 a month, PAYE and PRSI of about €900 a month, and supplier payments. A customer who owes €3,000 was due to pay in week 6 but will not pay until week 10.

The business is profitable over the quarter. It still runs out of cash in week 9.

Reading the forecast: spotting the gap early

When a week goes red, you have options, but only if you see it coming:

• Chase the late debt. If Declan's customer pays the €3,000 in week 6 as agreed, week 9 closes at €1,300 instead of -€1,700.
• Move a payment. Ask a supplier if the bulk order can be paid in week 10.
• Time a purchase. Delay buying new equipment until after the VAT week.
• Talk to the bank before the gap, not after it. A short-term overdraft is easier to arrange in week 2 than in week 9.

This is how to work out a cash flow forecast that earns its keep: it gives you weeks to act instead of hours.

Keeping it rolling each week

A forecast is only useful if it stays current. Each week:

• Replace last week's forecast figures with the actual figures from your bank.
• Update any receipts that have moved.
• Add a new week 13 at the end.

This takes a few minutes, but only if your bookkeeping is up to date. If your records are months behind, start with catch-up bookkeeping, then keep them current through our bookkeeping services. Accurate payroll figures help too, and our payroll services give you the monthly PAYE amount in advance.

Using your forecast with lenders and grants

Banks, Microfinance Ireland and Local Enterprise Offices all ask for projections when you apply for funding. A forecast you have kept and updated for months is far more convincing than one written the night before.

Pair it with recent management accounts, so the lender can see both where you are and where you are heading. Knowing how to create a cash flow forecast properly is one of the most useful skills you can bring to that meeting.

Frequently Asked Questions

Want help building your first forecast?

Abbey Blue Formations helps small businesses in Wexford and across Ireland build forecasts from up-to-date books. If you are starting a new company, our formation calculator is a good first step. To arrange a call, click here.