How to build a short-term cash forecast for a startup

A short-term cash forecast shows the money you expect to receive and pay, week by week, starting from cash you actually have. It helps you see whether upcoming payments are covered and when a delayed receipt could create a problem.

It answers a different question from a profit report. Revenue may be recorded before the customer pays, and an annual subscription may leave the bank in one payment. Use expected bank dates, not the month an invoice appears in the accounts.

Choose a useful period and starting balance

A weekly view of the next thirteen weeks is one practical option, not a rule. Choose a horizon long enough to include the payments and receipts you need to manage. The British Business Bank’s forecasting guide explains the basic receipts-and-payments approach and the importance of cash timing.

Start with checked bank balances at a stated date. Identify money that is restricted or unavailable for ordinary spending. Show any borrowing facility separately, with its terms and availability; do not quietly treat an unapproved overdraft as cash. Transfers between your own included accounts should not increase total cash.

Build receipts and payments from evidence

For receipts, use outstanding customer invoices, payment history and credible collection dates. Separate contracted amounts from uncertain sales, grants or investment. An expected funding round is not the same as cash received: make its amount, timing and conditions visible.

For payments, collect supplier balances, payroll dates, rent, subscriptions, loan payments, tax and pension obligations, equipment purchases and other commitments. Show cash receipts and payments including VAT where applicable, plus any net VAT payment to or refund from HMRC on its expected date. Confirm the treatment and dates with your accountant.

Give uncertain entries a short note and an owner. ‘Customer expects to pay in week two; sales lead to confirm’ is a checkable assumption. A rounded receipt with no customer, agreement or explanation is much harder to manage.

Use one opening-to-closing calculation

For every week: closing cash = opening cash + receipts − payments. That closing balance becomes the following week’s opening balance. Here is a hypothetical three-week example; the payments include all cash outflows assumed for this example:

• Week one: £50,000 opening + £10,000 receipts − £20,000 payments = £40,000 closing.

• Week two: £40,000 opening + £30,000 receipts − £35,000 payments = £35,000 closing.

• Week three: £35,000 opening + £5,000 receipts − £25,000 payments = £15,000 closing.

Across the three weeks, £50,000 + £45,000 − £80,000 = £15,000. This overall check should agree with the last weekly balance. The totals do not prove every payment has been included, so also check the source records.

Test a late receipt

Suppose £20,000 of week two’s receipts slips to week four. Keep all payments unchanged. Week two now closes at £15,000; week three closes at minus £5,000. The original forecast ended week three with £15,000, so the delay creates a £20,000 difference.

Without available funding or another agreed change, the forecast shows a shortfall. Do not insert an unexplained loan to remove it. Confirm collection prospects, examine spending that can genuinely move and agree actions before the affected dates. A receipt in week four does not solve a payment due in week three.

Weekly totals can still hide a problem within the week. If payroll is due on Monday and a large customer pays on Friday, check those dates individually. The lowest balance and its timing matter more than a comfortable month-end total.

Update it and explain what changed

Each week, replace the completed period with actual receipts and payments, reconcile the balance to the bank and extend the forecast. Explain changes in amount separately from changes in timing. Keep the previous version so you can learn which assumptions need improvement.

Keep input dates, assumptions and calculations visible. ICAEW’s spreadsheet guidance supports consistent, reviewable models. For a broader view of hiring, growth and funding, connect the short-term schedule to your longer-term financial model rather than maintaining conflicting assumptions.

Make cash part of the reporting routine

Reporting & planning brings your reports and forecasts together, built on the accounting we manage for you. Agree the forecast detail and review frequency your business needs; a weekly cash view should be scoped explicitly. A free Founder finance review can help identify gaps in your current setup and the priorities to address.