A cash flow forecast for new business planning shows how much money is expected to come into and leave a business each month. A cash flow forecast for a start up loan covers twelve months of money in and out, so it helps to understand the structure first. The key is to build it around realistic monthly assumptions rather than simply spreading annual figures across twelve months.
Start With Expected Sales
Begin by estimating what the business expects to sell in each month. If you offer several products or services, consider them separately and use a realistic selling price, cost price and expected sales volume.
Avoid assuming sales will be identical every month. A new business may take time to build customers, while seasonal demand can create stronger or weaker periods. For example, a café might start with modest sales, build gradually and experience a quieter January.
For illustration, a café might forecast £2,500 in sales in month one, £3,200 in month two and £4,000 in month three, while allowing for a quieter period later in the year. Be conservative in the early months and make sure increases have a reasonable basis.
Map Out Monthly Business Costs
Next, list the costs the business expects to pay and place them in the months when they actually occur. Regular expenses could include rent, utilities, insurance, marketing, wages and other operating costs.
Separate these from one-off setup expenses. Equipment, initial stock, website development or other launch costs may occur before trading or in the first few months. Recurring costs usually begin in month 1, after the pre-trading setup period.
If customers pay invoices after an agreed period, show the money in the month it is expected to arrive rather than automatically placing it in the month the sale is made. Consider when suppliers and other costs will actually be paid too.
Include Other Money Coming In
Sales are not always the only source of cash. Include any other money you genuinely expect to receive, such as grants or personal investment. Many new businesses have none, which is normal.
Include Funding and Repayments
If the business is using external funding, the forecast should show the relevant loan income and repayments. Check whether the planning tool being used already includes these figures before entering them manually.
For a Start Up Loan application, the forecast should also reflect the amount the business needs to provide as the founder’s income. This can come from the personal survival budget when continuing household income does not cover regular outgoings.
Getting Help Building the Forecast
Bizbritain is an FCA-authorised credit broker and an official Business Support Partner for the Start Up Loans scheme. Its free myplan tool helps applicants work through the business plan, personal survival budget and 12-month cash flow forecast using straightforward questions.
It can calculate sales revenue and cost of sales from the assumptions provided and place the loan drawdown and repayment into the forecast. Even when using a planning tool, however, the quality of the result depends on realistic sales, costs and payment assumptions.
Review All Twelve Months
Once all twelve months are completed, review the forecast as a complete picture. Look for months where cash becomes unusually low and check what causes the change. Make sure seasonal sales, setup costs, regular expenses, payment timing and funding movements are reflected in the appropriate periods.
The Takeaway
A cash flow forecast for new business planning is most useful when it shows what the founder realistically expects to happen month by month. Building it from clear assumptions gives you a better view of future cash needs and creates a more credible financial plan for a new business.
