A few months ago I sat down with a client who runs a successful wedding venue in Greater Manchester. On paper, things looked solid: decent profits and steady sales. He was planning to take some money out of the company to invest in an off-market property opportunity.
When we ran a proper cashflow forecast, the picture changed. Taking that money out would have left the business overdrawn for a few weeks over the next quarter. It wasn’t dramatic, just one of those real-life timing issues that catch so many owners out.
This isn’t unusual. In my experience, most cashflow forecasts that owners see, if they see one at all, are either optimistic spreadsheets or basic projections that don’t reflect how money actually moves in and out of the business.
Why most cashflow forecasts miss the mark
The usual approach is to take last year’s numbers, add a bit for growth and call it a forecast. It looks tidy, but it often falls down for four reasons.
- Timing gets ignored. Profit doesn’t arrive in the bank when it’s earned. You might invoice a big job in March and be paid in June, while wages, VAT and supplier bills go out on their own schedule.
- There’s no room for the unexpected. A supplier price rise, a late payment from a key customer, or the repair bill for the chiller that’s been running on borrowed time.
- There’s too much optimism. It’s natural to hope sales will keep climbing, but forecasts work best when they’re realistic rather than aspirational.
- They’re static. One set of numbers can’t show what happens if you hire, move premises, open another site or take on a big new contract.
The result is decisions made on incomplete information. Sometimes it works out. Sometimes it creates unnecessary stress or a missed opportunity.
What a useful cashflow forecast looks like
I build forecasts as practical tools for running the business, not compliance documents. They include:
- realistic assumptions based on your actual trading patterns
- clear timing for money coming in and going out, including VAT
- scenarios: best case, worst case and most likely
- regular updates as the year goes on
- a weekly view, not just the monthly one you can download online
It isn’t about fancy software or complicated models. It’s about having numbers you can trust when you need to make a decision.
Back to the wedding venue
The owner had built up a healthy profit and found a good opportunity to invest. His plan was to take out as much as he could while still leaving enough to cover a month’s overheads with no further income.
A detailed three-month rolling forecast, week by week, flagged four things he hadn’t allowed for:
- lower margins than last year, after his main caterers passed on higher costs
- new suppliers wanting deposits two months before the summer peak
- two cancelled weekends, with no bookings yet to replace them
- his quarterly VAT bill, which should never be a surprise
Had he taken the money out as planned, the business would have been overdrawn by the middle of the quarter. Not because it was struggling, because it was fundamentally sound, but because of when the cash moved.
Show the figures as a table
| Week | Original plan | Adjusted plan |
|---|---|---|
| Week 1 | £20k | £24k |
| Week 2 | £22k | £26k |
| Week 3 | £24k | £28k |
| Week 4 | £13k | £23k |
| Week 5 | £9k | £21k |
| Week 6 | −£7k | £5k |
| Week 7 | −£9k | £7k |
| Week 8 | −£5k | £5k |
| Week 9 | −£1k | £9k |
| Week 10 | £4k | £14k |
| Week 11 | £9k | £19k |
| Week 12 | £14k | £24k |
| Week 13 | £19k | £29k |
So we adjusted the plan together:
- we agreed an overdraft facility with his main bank, as a safety net
- he stepped up marketing to fill the two cancelled weekends
- one of the new suppliers agreed to take its deposit one month ahead instead of two
- we staggered the withdrawal, taking 10% of it four weeks later, which added a much-needed buffer
It was a relatively small intervention, but it gave him confidence and protected the business at the same time.
The bottom line
Cashflow forecasting shouldn’t be something you only look at when the bank asks for it. Done properly, it’s one of the most valuable tools for running a business, whether you’re planning growth, an owner withdrawal or a new hire, or simply want to sleep at night.
If you’ve ever had that uneasy feeling where the accounts say one thing and the bank balance says another, it’s worth a proper look at your forecasting. A 13-week rolling cashflow is part of my Strategic plan, and I also build forecasts as a one-off project.