Cash Flow Calculator

Cash flow forecasting tracks the actual movement of money in and out of your business on a weekly or monthly basis. The formula is straightforward: opening balance plus total cash inflows minus total cash outflows equals closing balance, and the closing balance of one period becomes the opening balance of the next. Unlike profit, cash flow accounts for the timing of payments. You may invoice £10,000 in March but not receive payment until May, and until that money lands it does nothing for your bank balance. A negative closing balance signals a shortfall that must be covered by an overdraft, a loan or by deferring payments, so projecting 12 months ahead lets you spot potential crises before they happen.

Cash inflows include customer payments, loan drawdowns, tax refunds, grants, asset sales, owner injections and any other money physically entering your bank account, including VAT collected from customers that is really being held for HMRC. Cash outflows cover supplier payments, wages, rent, utilities, loan and mortgage repayments, software subscriptions, insurance, marketing, equipment purchases, dividend distributions and tax payments (VAT to HMRC quarterly, PAYE, and Corporation Tax 9 months after the year end). Categorising each flow shows which areas consume the most cash. Two figures fall out of the forecast when money is going out faster than it comes in: the cash burn rate, which is average monthly outflows minus inflows, and the runway, your opening balance divided by that monthly burn, which tells you how many months the business can keep going before the cash runs out. The calculator shows both whenever your expenses exceed your income.

Profit and cash are different things, and confusing them is how profitable businesses go bankrupt. Profit is sales minus costs on an accounting basis. Cash flow is actual money in against actual money out, at the time it is received or spent. Picture a firm showing £100k profit on paper while customers owe it £150k on 60-day payment terms and a supplier needs £80k next week: there is no cash to pay. Around 80% of UK SME bankruptcies are put down to cash flow problems rather than a lack of profitability, which is why cash should be tracked weekly at a minimum and daily in a tight-cash business.

VAT is the classic UK timing trap. A customer pays a VAT-inclusive invoice and the whole sum sits in your account, but the VAT portion goes to HMRC with your return, which is due along with the payment 1 calendar month and 7 days after the quarter ends. Many businesses spend it thinking it is their own money, then face a lumpy bill after 3 months of collecting. Segregate it: pay yourself net of VAT only, and keep a separate bank account for VAT and Corporation Tax that you never touch. Some owners go further and keep 30% of revenue in a tax savings account as a buffer.

The standard tool for UK SMEs is a 13-week (3-month) rolling forecast, with weekly columns for opening cash, expected inflows, expected outflows and closing cash. Because it rolls forward every week, it gives early warning of shortfalls. Build it on conservative customer payment timing, assuming 60 days even if the invoice says 30, and add a buffer for unexpected expenses of 5-10% of monthly outflows. Update it weekly with actuals. Free spreadsheet templates are available from gov.uk, and Xero and QuickBooks have forecasting built in. This calculator applies the same opening-plus-inflows-minus-outflows logic month by month, carrying each closing balance forward and flagging the lowest point in the projection.

Late payment is the biggest cash flow killer: 56% of UK SMEs were paid late according to the FSB in 2024, and the average UK B2B invoice is settled 26 days late. Get tough by stating 14-day terms and charging late payment interest at 8% above the Bank of England base rate under the Late Payment of Commercial Debts Act. Seasonality bites too, with a Christmas retail boom followed by a January slump, and stock buildup ties up cash without generating revenue until it is sold.

On the improvement side, invoice immediately on delivery, because every day's delay is money lost. Offering a 1-2% discount for payment within 7 days often nets more than waiting 60 days. Direct Debit through GoCardless or Stripe makes recurring customers pay automatically. Factoring lets you sell invoices to a finance company for a typical 80-90% advance at a fee of 1-5%, with invoice finance offered by specialist lenders and most business banks. Negotiating longer supplier terms of 60-90 days improves cash flow without hurting profit.