How do I forecast my cashflow?


It is important to recognise that a company’s profit at the end of a given month, does not mean that the company has this much cash coming into the business. Are you aware of what is required from you, and what steps you may want to take to manage your cash flow and forecast effectively?

What format should my cash flow forecast take?

The term ‘three-way forecasting’ refers to the ability to forecast your profit, balance sheet and cashflow altogether, as these are all linked. There are balance sheet movements that have significant effects on a company’s cashflow, which do not appear in a company’s profit and loss.

Good cashflow is essential to help a business grow, so why wouldn’t you want to predict expenditure and be prepared for all eventualities? We have a range of simple and advanced cashflow forecasting solutions, all of which aim to support your business in the right decisions based on the right data.

How long should I forecast over?

Without forecasting a company’s cashflow, it would be almost impossible to estimate how much cash your company will have at a given time. Likewise, if you add to this wages, payroll taxes, VAT, corporation tax payments, loan repayments and other overheads, the situation can become even more complicated!

What is an audit, and do I need one?

An audit is defined as an official inspection of an organisation’s accounts, typically by an independent body. Many companies within the UK are likely to require an audit but are unsure what an audit is and when is it needed.

Click here to find out if you are legally required to have an audit

A company is legally required to have an audit if they reach two of the following thresholds:

  • Turnover greater than £10.2m;
  • Total assets greater than £5.1m; or
  • Greater than 50 employees.

Even if a company is below these thresholds, it will be required to have an audit if it is part of a group which breaches certain size thresholds. Additionally, sometimes the company’s articles or the shareholders will require an audit. Therefore, even small companies can be required to have an audit.

Providing comfort over the accuracy of management accounts, or revealing systematic errors occurring throughout the year, a year end audit is critical to decision making for an organisation placing reliance on management information. The process through which an audit is undertaken challenges the robustness of the internal controls and processes an organisation has in place, giving an external perspective and valuable feedback.