Cash Flow Projection Calculator
Create a UK business 12-month cash flow projection.
What this calculator does
This cash flow projection calculator maps twelve months of money in and money out. Enter current monthly turnover, monthly costs, and an expected monthly growth rate, and it returns projected annual turnover, annual net cash flow, and a month-by-month table showing income, expenditure, and the net position for each period.
The shape matters more than the total. An annual figure can hide a two-month trough in the middle of the year that would empty the account. Reading the schedule month by month shows exactly where the pressure falls and how much of a buffer you need to trade through it.
When to use it
Use it before any commitment that changes your fixed cost base — a hire, a lease, a vehicle on finance. Adding the cost to the expenditure line and rerunning the projection shows whether the business absorbs it comfortably or merely survives it in the better months.
It is also the document lenders expect with any finance application, and building it yourself rather than delegating it means you can defend the assumptions when questioned. Equally, it is a tool for deciding not to spend: a projection that dips negative in month seven is a clear case for deferring a hire until month nine.
Understanding the inputs
Monthly turnover should be cash you expect to collect rather than invoices you expect to raise. Where customers typically settle in 45 days, the money arriving in a given month reflects work done roughly six weeks earlier, and modelling it any other way defeats the purpose.
Monthly costs should include everything leaving the account: wages, PAYE and employer National Insurance, pension contributions, rent and business rates, software, loan capital as well as interest, and a realistic allowance for VAT payments in the quarters they fall. Growth rate compounds monthly — 4 percent a month is about 60 percent a year, which is a demanding pace to hold.
How is this calculated?
Monthly Net Cash = Revenue − Expenses. Ending Balance = Starting + Net Cash. Revenue grows at specified rate each month.
A worked example
A business currently turns over £42,000 a month against £45,000 of costs, growing 4 percent monthly. Month one is £3,000 down and month two £1,320 down, with cumulative cash bottoming out around £4,300 negative before turnover overtakes costs in month three at roughly £45,400.
From there it improves quickly. By month twelve turnover reaches about £64,700 and the monthly surplus is close to £19,700. Across the year, turnover totals roughly £631,000 against £540,000 of costs, leaving around £91,000 of net cash flow. The business is viable — but it needs at least £5,000 of headroom to reach month three, and a quarterly VAT payment landing in that window would make it considerably more.
Limitations and assumptions
The model uses a constant growth rate and flat costs, neither of which holds in practice. It has no seasonality, so a retailer taking 40 percent of annual turnover in the final quarter will find it seriously misleading. Costs also step upward as you grow rather than remaining level all year.
Critically, it does not model payment timing or the VAT cycle. Turnover is treated as collected in the month it is earned, which is precisely the assumption that leaves profitable businesses short of cash. If you invoice on credit terms, adjust the income line to reflect real debtor days, and run a rolling thirteen-week forecast alongside this annual view.
Common Questions
- Why is cash flow different from profit?
- Profit is recognised in your profit and loss account when a sale is made. Cash flow records when money actually moves. A business invoicing £80,000 in March on 60-day terms books the profit in March but sees no money until May, while payroll falls due every month regardless.
- How far ahead should I project?
- Twelve months for planning and thirteen weeks for survival. The annual view supports decisions on hiring and investment; the weekly view is what you need when cash is tight, because a monthly model can show a positive month while concealing a payroll you cannot meet mid-month.
- Where does VAT fit into a cash flow forecast?
- It is a cash item even though it never touches your profit and loss account. VAT collected sits in your bank until the quarterly return falls due, then leaves in a lump. Businesses that treat that balance as working capital get caught out every quarter, so model the payment explicitly.
- What else creates lumpy outflows in a UK business?
- Quarterly VAT, corporation tax nine months and one day after your year end, PAYE and National Insurance monthly, pension contributions, business rates, and annual insurance renewals. These irregular payments cause far more cash crises than day-to-day trading does, precisely because they are easy to forget when forecasting.
- What growth rate should I assume?
- Whatever the last six months actually delivered rather than what the plan promises. Four percent monthly compounds to about 60 percent annually, which is ambitious for an established business. Always run a pessimistic case at roughly half your assumed rate — that is the version worth planning against.
- How much cash buffer should I hold?
- Three to six months of operating costs is the usual guideline for an established business, while a startup burning cash typically wants twelve to eighteen months of runway. Businesses with seasonal turnover or long debtor days should sit at the upper end rather than the middle of those ranges.
- Can a profitable company run out of cash?
- Frequently, and rapid growth is the common cause. Growth means paying for stock and staff before customers pay you, so the faster you grow the wider the funding gap. More companies fail while profitable and expanding than fail while loss-making and contracting.
- How do I improve cash flow without winning more work?
- Shorten the gap between paying out and being paid. Invoice on delivery rather than month end, take deposits on larger jobs, offer a modest early settlement discount, negotiate longer supplier terms, and chase overdue invoices systematically. Ten days off average debtor days frees roughly a third of a month's turnover permanently.
- What should I do if the forecast turns negative?
- Act while the shortfall is still months away, because that is when you have choices. An overdraft or invoice finance facility is far easier and cheaper to arrange before you need it. Waiting until the month arrives narrows the options to emergency funding at the worst available price.