Blog
Managing Cash
18 Jun

As businesses look to rebuild and recover from the trading challenges of COVID-19 in the coming weeks and months it is vitally important that they manage and maintain good cash flow to ensure they remain viable and can trade.
To manage cash flow effectively, businesses need to be able to forecast how they will perform. A well-prepared forecast can help to:
- Predict sales performance
- Estimate cost and spend expectations
- Indicate when cash will come into and leave a business
Armed with this information, a business will be able to make important decisions in the knowledge that it can react effectively.
As a minimum, a business should look to compile a 30, 60 and 90-day cash flow forecast, but longer forecasts can also be useful up to a point.
Be aware that long-range forecasts may be less accurate as they will not be able to take into consideration future changes to business rules or the economy.
Preparing a forecast
The first element should be a sales forecast. This is the starting point of a profit and loss forecast, which can then be used to create a comprehensive cash flow forecast.
A sales forecast will include an estimate of how much you expect to sell in the future, normally broken down by month.
To create these estimates, you should look at your previous year’s sales figures to see whether there are any trends or seasonal variations.
You also need to take into consideration the introduction of new products or services and the expected market for these.
Additionally, if you plan to make more sales in a particular area, build that into your forecast. This should include any new contracts or retained work that is anticipated during this period.
At this stage, do not include any tax on the products or services sold as this will be incorporated later into the cash flow forecast.
The next stage, a profit and loss forecast, combines your business’s income and its costs to give you a projected profit figure for the future. By preparing this you should be able to:
- Estimate how much tax the business will be liable for
- Understand the costs of launching new products
- Gain an indication of loss-leading products and/or the first indications of negative cash flow.
Be sure to include costs in the month that you incur them, rather than the month that you pay for them.
All cash flow forecasts are prepared based on payment dates, but a profit and loss forecast must be prepared based on when you incur your costs.
At this stage, you can estimate and include VAT costs into the forecast. However, large one-off costs should not be included until the final cash flow forecast.
Using the information gathered so far you should now be able to build up an idea of cash flow within the business and prepare an accurate cash flow forecast that takes into consideration sales, profit and costs.
Drawing up these forecasts for your business needn’t take long, but it doesn’t hurt to seek professional assistance to ensure that forecasts are accurate and so that you have the advice to act on the information you receive.
With the advent of the latest cloud accounting technology, it has never been easier to effectively and accurately forecast cash flow.
Archive
- Requests for exemption from publication of furlough claims must be submitted by Monday 25 January
- Only a few days are left to submit applications for the third SEISS grant
- What could Budget 2021 have in store?
- HM Revenue & Customs increases the threshold for Self-Assessment online payment plan service to £30,000
- Independent commission argues against annual wealth tax but advocates a one-off charge
- Could the Government be about to launch a new permanent state-backed small business loan scheme?
- HMRC issues new warning over lockdown fraudsters
- FSB proposes move to turn Covid emergency debt into shared ownership schemes
- VAT – Post-Brexit arrangements
- Insurance industry to pay out on COVID-19 business interruption claims
- Are you making full use of the Government’s COVID-19 financial support package?
- Government extends agricultural visa scheme to fill jobs left by EU workers
- Brexit: UK Trader Scheme to support movement of goods between Britain and Northern Ireland
- Coronavirus furlough and loan schemes further extended
- Brexit trade deal negotiations continue as businesses warned to prepare for a ‘no deal’ scenario
- VAT under the Northern Ireland Protocol
- Northern Ireland customs duty arrangements confirmed
- Government launches new export finance guarantee scheme
- How can your business prepare for customs and VAT after Brexit?
- UK launches points-based post-Brexit immigration system
- Business Secretary writes to professional services sector ahead of end of Brexit transition period
- HMRC updates Statutory Residence Test due to COVID-19
- Scammers are targeting Self-Assessment taxpayers, says HMRC
- Eat Out to Help Out compliance checks underway
- Businesses face legal action over unpaid business rates
- HMRC publishes consultation on MTD for Corporation Tax
- HM Revenue & Customs issues Capital Gains Tax reminder
- Virtual Christmas parties eligible for £150 annual function exemption
- Grandparents set to increase gifting following pandemic and families set to inherit more than expected
- Access to European Union VAT refund system to end on 31 March 2021, HMRC confirms
- Brexit: How to claim grant funding to help cover the costs of completing new customs declarations
- Companies House to scrap paper reminder letters
- Third round of Self-Employment Income Support Scheme (SEISS) opens on Monday with tighter eligibility criteria
- Important deadlines approach for the furlough scheme
- Spending Review highlights long-term economic impact of Coronavirus pandemic
- The New COVID-19 Tier System
- VAT after the Brexit transition
- IFS predicts tax rises of more than £40 billion a year by the middle of the decade
- More than 50,000 people claim working from home tax relief through HM Revenue & Customs online portal
- HMRC called on to simplify the administration of tax reliefs
- A quarter of businesses don’t think they will be ready for post-Brexit Britain
- HMRC warns taxpayers still aren’t ready for Making Tax Digita
- Homebuyers need to start purchases this month to take advantage of Stamp Duty savings
- Daily penalties waived for Self-Assessment late filing
- Furlough scheme update – Publication of claims and employees serving notice
- Extended Coronavirus Job Retention Scheme FAQ
- Government extends furlough scheme and provides a boost to SEISS
- Government extends further help to businesses and the self-employed during national lockdown
- National Lockdown – Extension to the Coronavirus Job Retention Scheme and Business Support Update
- Government extends further support to businesses affected by COVID-19
- HM Revenue & Customs publishes further details of the Job Support Scheme
- Annual Investment Allowance – Time is running out
- Accounting for mobile phone use
- Time to prepare (once again) for the VAT reverse charge
- Is the Government considering a National Living Wage freeze?
- Companies House reforms to combat fraud and assist businesses
- Price of plastic bags in England to double to 10p
- New Coronavirus regulations place self-isolation obligations on employers
- Latest SEISS grants introduce new qualifying conditions
- Businesses may be entitled to insurance pay-out after important judgment
- Chancellor expands Job Support Scheme and grants to businesses facing new COVID-19 restrictions
- Government issues new guidance on the Job Retention Bonus
- Download the Government’s guide to the Job Support Scheme
- Important message to clients and friends: We are working remotely on recommendation from the PM, please read the following update
- Chancellor announces new Job Support Scheme and package of business support measures
- Change to Companies House bank detailsanies House bank details
- More than £1 billion in tax reliefs for creative industry
- Advisory Fuel Rates for next quarter come into effect
- Key dates for the Coronavirus Job Retention Scheme
- The first Child Trust Funds (CTFs) can now be claimed
- Four in five SMEs are confident over their Coronavirus recovery
- HM Revenue & Customs (HMRC) writes to 3,000 employers over furlough claims
- Government to launch new local lockdown grants
- CBILS ends on 30th September 2020
- How will you rebuild and recover? Funding launched to cover cost of professional advice
- Tax changes outlined in draft Finance Bill 2020 – 2021
- Coronavirus Business Interruption Loan Scheme expanded to more businesses
- VAT treatment of imported goods up to £135 to change under new rules
- HM Revenue & Customs publishes Job Retention Bonus guidance
- Small business Covid recovery boosted by £20million in new grants
- HM Revenue & Customs sets out Making Tax Digital plans for VAT and Income Tax
- HM Revenue & Customs sets out details of penalties for breaches of furlough and self-employment scheme rules
- Reminder: VAT payment deferral period has ended
- Banks list top 10 Coronavirus scams
- HM Revenue & Customs issues ‘nudge’ letters to people suspected of having undeclared overseas assets
- Second round of Self-Employment Income Support Scheme (SEISS) opens on Monday
- Key dates for Coronavirus support schemes, tax and Companies House
- Government extends childcare funding for families affected by the pandemic
- Green Homes Grant guidance published
- Eat Out to Help Out opens for claims
- Key dates for Coronavirus support schemes
- Eat out to help out
- New legislation introduced to protect redundancy pay of furloughed workers
- Seven tips to get start-ups off the ground
- Government confirms Coronavirus tax concessions in amended Finance Bill
- Future Fund expanded to more businesses
- Research finds lack of knowledge, information and skills are key barriers to Making Tax Digital compliance
- New corporate insolvency rules come into effect
- £84 billion of R&D tax credits unclaimed – Could you be eligible for a share of this funding?
- Government confirms Job Retention Bonus of £1,000