Cookies on Knowhow Nonprofit

We use cookies in order for parts of Knowhow Nonprofit to work properly, and also to collect information about how you use the site. We use this information to improve the site and tailor our services to you. For more, see our page on privacy and data protection.

OK

Skip to content. | Skip to navigation

Community-made content which you can improve Case study from our community

12. Financial forecasts

This page is free to all
Guidance on writing the 'Financial forecasts' section of your business plan.

Background

This is the section that can make or break a business plan.

You might have a fantastic proposition, a great product and a passionate team, but if your finances don’t add up, or your forecasts are unrealistic, it will let the whole plan down.

If you’re not good with numbers, try to find someone who is to help you check that everything makes sense. There are lots of free templates on the internet that will do the sums for you.

We’ve produced some simple financial templates to get you started. But remember, these are only as good as the data that you put it in. Financial forecasting is a best guess of what your income and expenditure is going to be, so try to find out as much information as you can about your costs, income and likely sales before you start to work out the numbers.

12.1 Cash flow forecast

Most voluntary organisations will be used to managing a budget of some kind. However, you may not be used to using a cash flow.

A budget is how much you have to spend on particular items over a specified period. You would use this to manage a grant, for example. You know how much you have, and you may have secured the income already.

A cash flow forecast is a prediction of your income and expenditure over a specified period, usually 12 or 15 months. If you’re generating income from trading (sales), a cash flow forecast is vital to ensuring that you have enough money in the bank to cover your costs. It will also tell you if and when you need to borrow money, for example through an overdraft facility or with a bridging loan.

You can manage cash flow by finding ways to spread your costs. Find out if you can pay your bills by monthly Direct Debit, rather than in a lump sum. Review your suppliers regularly and ask for new quotes at least once a year. Make sure you prepare for delays in payments from clients – you might not receive payment in the same month that you issue an invoice.

Complete the cash flow forecast

Follow the instructions below to complete the cash flow forecast in the financial tables template. When you’re done, you can copy the table from Excel into your business plan.

How to fill in the cash flow forecast template

  1. Enter the correct financial year in the top left cell.
  2. Change the order of months in the second row if your financial year does not start in April.
  3. Add in your opening balance for month 1 in the yellow cell. This is the money you will have in the bank before you start.
  4. List your income sources in the first column (delete the examples in italics).
  5. Enter figures against each income source, according to when you expect to receive that income. For example, grants are usually paid quarterly in advance and contracts are often paid quarterly in arrears (after you’ve done the work). Try to predict your sales forecast as accurately as possible.
  6. List your items of expenditure (delete the examples in italics).
  7. Enter figures against each item of expenditure, according to when you think you will pay for it. Some items will be the same every month, for example your rent. Others will vary according to the time of year and your level of activity.
  8. Write down any assumptions you’ve made about each item of income or expenditure in the last column (delete the examples in italics).
  9. Look at the bottom row (‘closing balance’). If you’re in the red at any point, you’ll need to describe your plans to cover these periods, for example through an overdraft facility with your bank. You can do that in the box below.

Summarise any assumptions you've made about your cash flow

For example, you might expect seasonal variations in sales or lower attendance during holiday periods. Make sure you plan for annual increases to rates or travel costs.

Give as much information as you can in the assumptions column to help the reader understand how you came up with your figures. If you need to cover periods of negative cash flow, set out how you plan to do this here.

Describe how you worked out your sales figures

It’s hard to predict exactly how much you’ll sell, but if you have a good understanding of your target market and a clear pricing strategy, you should be able to make a reasonable estimate.

12.2 Costs table

Complete the cost table

Follow the instructions below to complete the cost table in the financial tables template. When you’re done, you can copy the table from Excel into your business plan.

How to fill in the cash flow forecast template

  1. Complete the cash flow table first.
  2. The costs table will draw information from the cash flow table, so you shouldn’t need to enter any information into the first or last column.
  3. In the middle column, describe how you’ve worked out each cost and any assumptions you’ve made about when that cost will be incurred. Make sure this matches what you’ve entered in the cash flow. For example, if you think that most of your travel costs will happen in May, June and July, make sure that is reflected by the figures in your cash flow table.
Page last edited Jun 18, 2018

Help us to improve this page – give us feedback.

1 star 2 stars 3 stars 4 stars 5 stars 2.9/5 from 330 ratings

Find out how-to…

How-tos are written by our users to share practical knowledge.

And if there isn't one already you can write it yourself, or request someone else write it.

See all how-tos