Cash Flow Forecast: How to Create One for Your Startup

MADE.com and Webvan show why ambitious growth needs sound financial planning. Strong sales or expansion plans don't guarantee a sustainable cash position

In 2021, British online furniture retailer MADE.com was valued at around £775 million when it floated on the stock market. Just over a year later, it was fighting for survival. Rising costs, weaker consumer demand and high stock levels put pressure on the business. In November 2022, MADE.com entered administration (read the announcement from its administrators).

Another cautionary tale is Webvan, a US online grocery startup that planned to expand into 28 major metropolitan markets within three years. It invested heavily in infrastructure, and its share price fell sharply by 2001 (read Stanford Graduate School of Business's Webvan case study).

These businesses operated on a scale far beyond most startups, but their stories raise a question every founder needs to consider: will there be enough cash available when the next payments are due?

It's a question that comes up regularly in the Startup Networks forum. One popular thread walks through what to do when a startup is close to running out of cash: get a clear, honest view of the real numbers first, rather than hoping the next sale arrives in time. That's the same instinct a cash flow forecast is built around, except done before the crisis rather than during it.

A customer might agree to a large contract, but the money may not arrive for 30 or 60 days. Meanwhile, rent, salaries, software subscriptions and supplier invoices still need paying. A promising sales pipeline is not the same as cash in the bank.

That's where a cash flow forecast helps. It estimates when money will enter and leave your business, how your cash balance could change, and whether a shortfall may be on the horizon.

What Is a Cash Flow Forecast?

A cash flow forecast estimates how much money will come into and go out of your business over a future period. It helps you predict how much cash you'll have available to pay bills, cover operating costs and fund your next steps.

Unlike a profit and loss forecast, which estimates revenue and expenses, a cash flow forecast focuses on when money actually moves. That timing matters more than most founders expect until it catches them out.

Imagine your startup completes £5,000 worth of work in May and invoices the customer. If the payment terms are 60 days, you might not receive the money until July. In the meantime, you still need to pay rent, staff and software costs. Your business may be making sales and still struggle to cover its bills.

A forecast helps you spot that gap early. It isn't about predicting the future perfectly. It's about making sensible estimates, updating them as circumstances change and giving yourself time to act.

Use the free Cash Flow Forecast Template from Startup Networks UK to organise expected receipts and payments in an editable 12-month spreadsheet. This guide explains how to build a forecast and use it to make better decisions.

Why Do Startups Need a Cash Flow Forecast?

Prepare for late customer payments. Winning a customer is one thing; getting paid is another. If you offer payment terms, account for the gap between sending an invoice and receiving the money.

Spot potential cash shortages. A forecast can show when expected payments exceed receipts. You then have time to chase overdue invoices, review spending, negotiate terms or explore funding before the situation becomes urgent.

Plan growth carefully. Hiring, buying equipment, increasing stock or spending more on marketing can support growth, but these decisions need cash. Forecasting helps you check whether you can afford the investment while covering existing commitments.

Prepare for irregular costs. Annual insurance, tax payments, equipment repairs and seasonal changes in sales can affect your cash position. Including them makes expensive months easier to anticipate.

Make more informed funding decisions. If you're considering a loan, grant or investment, a forecast helps estimate how much money you need and when. It may also show whether changes to spending or payment timing could solve the problem without additional funding.

The forum thread mentioned earlier makes a related point worth repeating here: by the time a startup is genuinely close to running out of cash, options narrow fast. A forecast built months earlier is what turns an urgent crisis into a manageable adjustment, because the warning shows up while there's still time to act on it.

“A sale is great news, but it doesn't pay the bills until the money actually arrives. Knowing when that money is coming can make the difference between planning your next move and scrambling to keep the business going.”

How to Create a Cash Flow Forecast in 6 Steps

You don't need advanced accounting skills to build a useful forecast. Start with the cash you have, estimate what will come in and go out, and keep your assumptions realistic. The free Startup Networks UK template provides an editable 12-month spreadsheet.

1. Enter Your Opening Cash Balance

Start with the cash your business has available at the beginning of the first month. Use the actual available balance, not expected sales or unpaid invoices. If you start January with £8,000 in your business account, enter £8,000 as your opening balance.

2. Estimate Cash Coming In

List the money you expect to receive each month, including customer payments, online sales, subscriptions, grants, loans or investment. Focus on when you expect to receive the money, not when you make the sale or send an invoice.

If you invoice a customer for £3,000 in March but expect payment in May, include the receipt in May. If the date is uncertain, make a realistic estimate and update it when you know more.

3. List Expected Payments

Record the money you expect to pay out: rent, salaries, software, insurance, marketing, stock, materials and delivery costs. Include less frequent payments too, such as VAT, PAYE, Corporation Tax, equipment purchases or annual insurance, where relevant.

Check statements, invoices and contracts for overlooked costs. If an expense is uncertain, estimate it sensibly.

4. Put Each Receipt and Payment in the Right Month

Timing is one of the most important parts of forecasting. A business may expect enough income over the year but still struggle if the cash arrives after major bills are due.

For example, a startup might expect £10,000 from customers in June but need to pay £7,000 in salaries and £5,000 to suppliers that month. If the customer money arrives in July, the business still needs to cover £12,000 of June payments with whatever cash it already has. Put receipts and payments in the months when the cash is expected to move, not when the paperwork says it should.

5. Review Net Cash Flow and Closing Balance

Your template calculates net cash flow and closing balance automatically. The basic calculations are:

• Net cash flow = Total cash received − Total cash paid

• Closing balance = Opening balance + Net cash flow

If you start the month with £8,000, receive £12,000 and pay out £9,500, your net cash flow is £2,500 and your closing balance is £10,500. That closing balance becomes the next month's opening balance.

Watch for months when the balance falls sharply or becomes negative. You may need to reduce spending, bring payments forward or arrange additional funding.

6. Update Your Forecast Regularly

Your first forecast is an estimate, not a fixed plan. Review it monthly, compare estimates with actual results and update future months when customers pay late, sales fall short or costs rise.

If payments consistently arrive later than expected, adjust your assumptions rather than relying on the original dates. A forecast earns its keep only when it reflects your current situation, not the one you started with.

A Simple Cash Flow Forecast Example

Imagine a small UK business selling handmade homeware online. Orders are growing, but the founder must pay suppliers before the next batch of products is ready.

These figures are illustrative and don't represent an actual business.

The business is receiving thousands of pounds each month, but payments are consistently higher than cash receipts. By March, available cash has fallen from £8,000 to £2,500.

That doesn't automatically mean the business is failing, but the founder needs to understand the shortfall. They might negotiate supplier terms, chase overdue invoices, cut discretionary spending or delay a purchase. If cash may still run out, funding could be necessary. This is exactly the point where the Startup Networks thread picks up: once you've got a clear view of the numbers, the next move is usually some mix of cutting non-essential spend, chasing what's owed, and having an honest conversation with suppliers or investors before the balance hits zero, not after.

Common Cash Flow Forecasting Mistakes

Assuming every sale will be paid on time. An invoice isn't cash in the bank. Account for payment terms and possible delays, especially if you rely on a small number of customers.

Underestimating expenses. Rent and salaries are obvious, but annual insurance, repairs, tax payments and software renewals are easy to overlook. Check statements and existing commitments.

Being too optimistic about sales. Don't build the whole forecast around your best-case scenario. Use actual sales, confirmed orders and realistic assumptions about future demand.

Confusing profit with available cash. You might sell £5,000 worth of products but have to wait weeks for payment while paying suppliers immediately. The timing of transactions matters.

Never updating the forecast. A spreadsheet completed once and forgotten won't help you respond to changing circumstances. Review it regularly and adjust future figures when plans change.

A forecast's real value lies less in the accuracy of any one number and more in whether it gives you an honest early warning.

How to Use Your Forecast to Make Better Decisions

Compare forecasts with actual results. Review the numbers monthly. Did customers pay when expected? Were costs higher than planned? Use the differences to improve your estimates.

Plan for different scenarios. Consider what happens if sales fall by 20%, a major customer pays late or an unexpected expense arrives. You can also model a stronger sales period to see whether you could afford to hire or invest.

Act before cash becomes a problem. If your forecast shows a shortfall in two months, don't wait until your bank balance is nearly empty. Review non-essential spending, follow up on outstanding invoices, discuss payment terms with suppliers and explore funding if needed.

Track your cash runway too, meaning how long your available cash could support the business if spending continues and income doesn't improve. This is particularly useful for startups with unpredictable revenue, and it's worth revisiting the same forum discussion mentioned earlier if you want a sense of what founders actually do once that runway starts looking short.

A simple spreadsheet updated consistently is often more useful than an elaborate financial model that quickly becomes outdated.

Download Your Free Cash Flow Forecast Template

You don't need expensive software or a finance background to start planning your business finances. What matters is understanding when money is expected to arrive, what needs to be paid and how much cash may be left.

Download the free Cash Flow Forecast Template from Startup Networks UK to organise receipts and payments, calculate your projected balance and spot potential shortfalls. Customise it and update the figures regularly.

Download the free template and take the first step towards managing your cash flow with greater confidence.

Final Thoughts

Cash flow forecasting isn't about getting every number right. It's about knowing what's coming, understanding the risks and giving yourself time to respond.

Start with the figures you know, make realistic estimates and keep updating them as your business evolves. A simple forecasting habit can help you prepare for expenses, make more confident decisions and plan for sustainable growth.