How to keep an eye on my cash flow

We reported last week that a new survey from Nucleus Commercial Finance revealed that almost 25% of SMEs are operating with little or no savings behind them, meaning good cash flow is a vital lifeline for the business’s survival. Research showed that out of the SMEs surveyed that did have savings, almost 80% had to turn to those savings to pay for overheads, pay staff, make premises COVID-secure or to invest in online offerings since the beginning of the current pandemic.

These statistics reinforce the importance of a positive cash flow and if your business is struggling with this, we have published tips before on how to overcome cash flow issues. However, as a result of the widespread issue of late payments, across all industries, and the new research from Nucleus Commercial Finance, we wanted to give you our top tips on how to prepare a robust cash flow forecast to help you plan for the future.

Firstly, a reminder about what cash flow is and how it impacts your business. In its simplest form, cash flow is the amount of money received into your business and the amount of money your business spends each month. Xero estimates that almost 50,000 small businesses collapse each year as a direct result of poor cash flow.

Why Is Cash Flow Forecasting Important?

Having a positive cash flow means that you are receiving money from your customers in a timely manner and your working capital is not tied up in late payments. This, in turn, means that you can pay your own bills on time. For many SMEs, cash is the lifeblood of the organisation, so understanding your cash flow forecast can be the difference between success and failure for your business.

Why Should I Prepare A Cash Flow Forecast?

A cash flow forecast can be useful in lots of different scenarios for your business. It can help you plan for the future and identify times when a cash injection might be required. You will also be prepared for payment dates for employees and suppliers and will be able to visually see how these payments will affect the working capital of the business. This data will also be helpful if you decide to apply for commercial funding at any point, banks will often request to see a copy of your cash flow forecast.

How Do I Prepare A Cash Flow Forecast?

Firstly, you need to start tracking all forms of income that are generated through your business. This is all of the funds that are generated by sales, whether they are paid instantly or through payment terms. You will also need to track all other forms of income not related to sales i.e. cash injections, bank loans, interest or any one-off payments.

After collating all of your income data, you can then move onto your business’s outgoings. This should include all of the running costs associated with your business and you should be including expenses like:

  • Rent
  • Wages
  • Marketing Costs
  • Utilities
  • Production Costs (including materials, packaging etc.)
  • Professional fees etc.


To ensure that you have captured all of your outgoings, it is a good idea to inspect your bank statements whilst you are doing this exercise and make sure that there are no regular monthly/quarterly/yearly payments that you might have missed.

What Do I Do Now That I Have All of This Data?

Now that you have identified all of your monthly incomings and outgoings, you can create a yearly tracker which shows all of your income and expenses each month. This will then generate a positive or negative net cash flow figure when subtracting your total monthly expenses from your total monthly income. It is often useful to also track your monthly closing and opening balances too.

How Will This Help Me?

Now that you have your next twelve months of cash flow figures in front of you, you will be able to identify certain times throughout the year when your cash flow might dip into negative figures. This gives you the opportunity to plan for this eventuality and you could look to decrease your payment terms around these times of the year, to encourage prompt payments from your customers or consider business funding to inject some cash into the business.

If you have done this exercise and identified that your cash flow is suffering because of late and unpaid invoices, then contact our friendly and helpful team today to see how we can help you move from the red into the black. Our experts have a proven track record in professionally and efficiently using all of the tools and techniques at their disposal to recover any debts owed to your business, enabling an immediate improvement in the cash flow of your business and taking away the stress from you. We operate on a no collection, no fee basis so you have nothing to lose. Call us today: 0800 009 6106

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