Cash flow forecast: template and how-to

What a cash flow forecast shows

A cash flow forecast lines up every expected payment coming in against every payment going out, month by month, and shows how your bank balance moves over time. The goal is simple: never run out of cash, even when customers pay late or a large bill falls due.

Behind it sits one basic equation: opening balance + cash in − cash out = closing balance. The closing balance of one month automatically becomes the opening balance of the next. That is how every month links up without a gap.

Cash is not the same as profit. Profit is recognised when a service is delivered, cash reflects when the money actually moves. That is why a profitable business can still be short of cash, for example when customers only pay after 60 days, when inventory is being built up, or when an investment is due.

That is exactly why Planvik asks you for your average collection period, the DSO (Days Sales Outstanding). It tells you, on average, how many days your customers take to pay. With it the forecast shifts each sale to the month when the money really lands, not the month you raise the invoice. If you leave it blank, Planvik uses a common industry default of 45 days.

Example: six months at a glance

A simplified example shows the idea. All amounts in euros.

Item	Jan	Feb	Mar	Apr	May	Jun
Opening balance	20.000	22.500	26.300	32.050	36.500	44.200
Cash in	40.000	42.000	45.000	43.000	48.000	50.000
− Purchases	14.000	14.700	15.750	15.050	16.800	17.500
− Payroll	15.000	15.000	15.000	15.000	15.000	15.000
− Fixed costs	6.000	6.000	6.000	6.000	6.000	6.000
− Debt service	2.500	2.500	2.500	2.500	2.500	2.500
Net movement	2.500	3.800	5.750	4.450	7.700	9.000
Closing balance	22.500	26.300	32.050	36.500	44.200	53.200

Planvik books income tax (corporate and trade tax) as a single annual payment at year end, so it appears in December and not in this half-year snapshot. All amounts are net of VAT. If the closing balance drops below zero, the forecast reveals a funding gap that you close with an overdraft facility, renegotiated payment terms or an investment spread over time.

Your cash flow forecast, straight from your financial plan

Planvik builds the 12-month cash flow automatically, month by month, and links it to your P&L, investments and loan repayment schedules. You enter your assumptions, the forecast works out the bank balance for every month.

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Direct and indirect method

There are two ways to work out cash flow:

Direct method: cash in and cash out are listed directly, exactly as in the example above. Ideal for day-to-day management and for banks, because it shows when each amount actually moves.
Indirect method: starting from net income, non-cash items such as depreciation and changes in working capital are adjusted for. This is the standard approach in the cash flow statement.

Common mistakes

Treating revenue as cash received. Payment terms often push the money in by weeks.
Mixing net and gross. Professional forecasts work net throughout. Switch between gross and net and you distort the balance.
Leaving out investments, taxes or debt service. These are exactly the large outflows that otherwise blow holes in the plan.
Only annual figures instead of months. An annual number hides the months when the account runs dry.

Frequently asked questions

How many months should a cash flow forecast cover?

Twelve months on a rolling basis is the norm. For a loan application the first year is usually month by month, with the later years shown annually.

What is the difference between a cash flow forecast and a cash flow statement?

The cash flow forecast looks forward month by month and is a management tool. The cash flow statement looks back and is part of the annual accounts, usually prepared using the indirect method.

Does the forecast include or exclude VAT?

Planvik plans on a net basis, so excluding VAT, as is standard for bank forecasts. VAT is a pass-through item: you only collect the tax you charge and pay it on again, so it does not change your result or your medium-term liquidity. Net of VAT the forecast stays cleaner and easier to compare.

What do I do about a funding gap?

Keep an overdraft facility ready, negotiate shorter payment terms with customers and longer ones with suppliers, or spread larger investments over time.