How to build cash flow into your business plan

Step 1 — include a proper cash flow forecast

A credible plan needs a cash flow forecast alongside the profit projection, because the two differ — and it is cash that keeps the business alive. Show, month by month for at least the first year, expected receipts and payments and the resulting bank balance. This is often the section a lender turns to first, because it reveals whether you grasp the difference between profit and cash.

Step 2 — base it on stated assumptions

Every figure in the forecast should rest on an assumption you can defend: how fast customers pay, how quickly stock sells, when tax falls due, what growth you expect. List these assumptions explicitly. A forecast with clear, realistic assumptions is credible; one with round numbers and no reasoning is not. Reviewers test the assumptions, not just the totals.

Step 3 — show you've thought about the gap

If your plan involves growth, the forecast should show the cash flow gap that growth creates — and how you will fund it. Demonstrating that you understand growth consumes cash, and have a plan for it, is exactly what reassures a lender you will not overtrade. It turns a red flag into a sign of competence.

Step 4 — stress-test it in the plan

Include a sensitivity or downside case: what happens to cash if sales come in 20% lower, or customers pay a month slower? Showing you have modelled the downside and can survive it makes the plan far more convincing than a single rosy projection. Lenders fund businesses that have thought about what could go wrong.

Step 5 — use it to size your ask

The forecast tells you exactly how much funding you need and when, so your application asks for the right amount for the right reason. A precise, forecast-backed request is far stronger than a round-number guess.

Credicorp lends to your company, not to you personally, and takes no personal guarantee. See business loans or apply online.