Cash Flow Calculator

About the Cash Flow Calculator

More small businesses fail because they run out of cash than because they are unprofitable. A business can win orders, make a profit on paper and still be unable to pay its staff at the end of the month, because customers have not paid yet, stock has been bought in advance, or a tax bill has fallen due. Cash is what pays the bills, and watching it is one of the most important jobs of anyone running a business.

This cash flow calculator gives a quick view of where the bank balance is heading. From the opening cash balance, the cash coming in and going out each month, and the number of months to look ahead, it gives the net cash flow, the closing balance, and — when more is going out than coming in — the cash runway: how many months the money will last and in which month the balance would go below zero.

How to Use the Cash Flow Calculator

Enter the opening cash balance: the money in the bank now.

Enter the typical cash coming in each month: payments from customers and any other receipts.

Enter the typical cash going out each month: supplier payments, wages, rent, loan repayments, tax and everything else that leaves the account.

Choose how many months to look ahead.

How Cash Flow Is Calculated

  net cash flow   =  cash in − cash out            (each month)
  closing cash    =  opening cash + net cash flow × months
  runway          =  opening cash ÷ monthly outflow (when net is negative)

Step-by-Step Example

Opening cash of 20,000, cash in of 45,000 a month, cash out of 50,000 a month, looking six months ahead.

  Net cash flow:    45,000 − 50,000       =  −5,000 a month
  After 6 months:   20,000 − 5,000 × 6    =  −10,000
  Runway:           20,000 ÷ 5,000        =  4 full months

The balance reaches zero at the end of the fourth month and goes overdrawn in the fifth, unless something changes.

Cash Flow Is Not Profit

Profit and cash flow measure different things. Profit counts a sale when it is made, even if the customer will not pay for sixty days. It spreads the cost of equipment over its useful life through depreciation, even though the cash left the business on the day it was bought. And it ignores loan principal repayments, which use cash but are not an expense.

So a growing business can be profitable and short of cash at the same time: it buys stock and pays staff to fulfil new orders before the customers pay. That is why a cash flow forecast is needed alongside the profit and loss account.

Improving Cash Flow

Get paid faster. Invoice as soon as work is done, set clear payment terms, chase overdue invoices promptly, and offer easy ways to pay. Deposits and staged payments bring cash in earlier on larger jobs.

Pay out more slowly — fairly. Use the full credit terms suppliers offer, and negotiate longer terms where you can, without paying late.

Hold less stock. Money tied up on shelves is not in the bank.

Time large purchases. Spread them, lease equipment, or buy when cash is strongest.

Cut or delay costs that do not directly bring in revenue.

Arrange finance before you need it. An overdraft or credit line is easier to set up when the business is doing well than in a crisis.

Building a Month-by-Month Forecast

This calculator uses the same figures every month, which is a good first check. A full forecast goes further, listing each month separately so that seasonal sales, quarterly tax payments, annual insurance and one-off purchases appear in the months they actually happen. A spreadsheet with a column for each month and a row for each type of cash in and out is the usual tool, updated each month with actual figures so the forecast stays realistic.

Warning Signs to Watch

Some patterns suggest cash trouble ahead before the balance actually falls. The overdraft is used more often or for longer each month. Suppliers are being paid later than agreed. Customers are taking longer to pay, or a large share of income depends on one or two clients. Tax bills arrive without money set aside for them. Stock is building up while sales stay flat.

Spotting any of these early gives time to act — to chase debts, talk to the bank, renegotiate terms or cut costs — while there are still options. Running the cash flow calculator every month, with up-to-date figures, is a simple way to keep an eye on the direction of travel.

Understanding Your Result

Closing balance is the cash expected in the bank at the end of the period.

Net cash flow is the monthly difference between cash in and cash out.

Runway shows how long the cash lasts if the balance is falling, or how soon an overdraft is cleared if it is rising.

Change over the period is the total increase or decrease.

Worth knowing suggests how much needs to change to close a gap.

When Should You Use This Calculator?

Planning the next few months of a business.

Checking how long savings will last for a new business.

Deciding whether you can afford a new hire or purchase.

Preparing for a conversation with a bank or investor.

Testing the effect of a price rise or cost saving on cash.

Common Mistakes

Confusing profit with cash.

Forgetting irregular payments such as tax bills and annual insurance.

Assuming customers pay on time.

Leaving out loan principal repayments.

Waiting until cash runs low before arranging finance.