Cash Flow Forecast Example for a UK Limited Company
This fictional example shows why an invoice is not the same as money in the bank. Start with payment dates and use the forecast to spot a shortage before it arrives.
A three-month worked example
Northway Services Ltd starts with £6,000. The figures below are cash movements, not a profit-and-loss statement. They exclude VAT, payroll and tax solely to keep the arithmetic easy to follow. Add those items to a real forecast where they apply.
| Cash movement | Month 1 | Month 2 | Month 3 |
|---|---|---|---|
| Opening balance | 6,000 | 4,000 | 3,500 |
| Customer receipts | 4,000 | 6,000 | 8,000 |
| Operating payments | 5,000 | 5,000 | 5,500 |
| Equipment payments | 1,000 | 1,500 | 0 |
| Closing balance | 4,000 | 3,500 | 6,000 |
Check the arithmetic
Month 2 closes at £3,500: £4,000 opening cash plus £6,000 received, less £5,000 operating costs and £1,500 equipment. That becomes Month 3’s opening cash. Every month must join up this way.
Now test a late payment
If £3,000 expected in Month 2 arrives in Month 3 instead, Month 2 closes at £500. Month 3 still closes at £6,000 if everything else stays unchanged. The eventual total hides a period when the business has very little room for another bill.
That is why a forecast should show a minimum cash buffer and realistic collection dates. An apparently healthy sales month may still create a short-term payment problem.
Make the example fit your company
Replace the totals with customer-by-customer receipts and dated bills. Add VAT payments, payroll, tax, borrowing, director funding and dividends only where appropriate and supported. The bank balance is not automatically available for distribution.
Use the free twelve-month forecast template, late-payment guide and month-end checklist.
Explore Polar’s business tools or the connected business software for the next practical step.