Cash flow forecast and liquidity in your accounts

A cash flow forecast, also called a liquidity budget, is a table by week or by month. At the top sits today's bank balance, then the receipts you expect, then the payments you expect, and at the bottom the balance at the end of each period. If that balance turns negative somewhere, you know which week needs attention before the bank points it out.

Receipts come from your open sales invoices. You do not look at the invoice date but at when the customer is likely to pay in practice, which for some customers is later than the agreed payment term. To that you add expected income from orders not yet invoiced, and any grants or loans you are due to receive.

Payments come from the open purchase invoices on their due dates, plus the fixed costs. Think of salaries, rent, insurance, the VAT return, taxes and loan repayments. A wholesaler adds the large purchase orders, a service firm mostly its payroll, and a small producer its raw material purchases.

Many companies also keep a cautious variant next to the expected one, in which large customers pay later and a planned investment goes ahead anyway. That shows in advance how much room you have before you need a loan or a payment deferral, and lets you talk to the bank before things get tight. It does not have to be complicated. An overview you can update in a short sitting gets used more often than a model nobody dares to touch.

The value is in the upkeep. A forecast built once a year helps very little. SMEs that benefit from it update it every week with the actual bank movements and roll the expectation forward. That also shows quickly which customers consistently pay later than assumed.

Uniconta is cloud-based ERP and accounting software. Three tools are confirmed. First, cash flow reports, which are part of the financial reporting. Second, budgets, which you record per ledger account, per period and per dimension, with a comparison of actual against budget. Third, a liquidity KPI on the standard dashboard, for which accounts have to be linked to the right account type.

What we have not confirmed is a liquidity forecast as a separate function. We therefore do not describe Uniconta as a program that draws up a weekly forecast by itself. The cash flow reports show what has happened and the budgets record what you expect, but the expected receipts and payments by week are something you enter yourself. The budgets are mostly useful for explaining deviations. Are purchasing costs higher, is revenue lower, or did a cost arrive that nobody foresaw? Because budget and actuals sit side by side per account, period and dimension, you can answer that without first collecting figures from several lists.

That is what we set up around it. We make sure the accounts and dimensions are structured so that cash flow, budget and dashboard actually say something, and that the bank connection supplies current transactions. How you build and maintain the weekly forecast alongside is something we agree with you. For updating the figures at the end of each period you have the month-end close, and for the result the profit and loss account.