How to create a cashflow plan and why it's so important

Reading time: 6 min.
A cash flow plan shows the current and future cash position of a company.

A cash flow plan helps those responsible to make optimal decisions because it shows how the cash situation will develop in the coming months. Here we show you how to create and work with a cash flow plan.

Cash flow plan: Definition

A cash flow plan shows the current and future cash position of a company. It shows the expected cash flows on a monthly, weekly or even daily basis. The cash flows represent all income and expenses of the company that are related to its operating activities.

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To create a cash flow plan, you need to have insight into all the business accounts of a company where transactions take place. Each transaction is a cash flow, where an outgoing cash flow is an expense and an incoming cash flow is a revenue.

By subtracting these expenses from the income each month, week or day, you get the expected cash balance, which can be either positive or negative, i.e. a surplus or a deficit.

If the cash balance is regularly negative, a cash shortage occurs, which in the worst case leads to insolvency. The cash flow plan helps to identify cash shortages at an early stage so that you have enough time to act.

Cash flow plan in 3 steps

Revenue & expenses from the last 6 months up to now

If you have never prepared a cash flow plan before, we recommend that you first get an overview of your past cash situation. This will help you later to make better estimates for your expected income and expenses.

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Go through all your bank statements from the last six months and divide the different income and expenses into categories, for example:


  • Revenue from sales
  • Income from financial investments
  • Grants
  • Tax refunds
  • Revenue from licences
  • Other revenues


  • Salary payments and wages
  • Inventory
  • Expenses for marketing
  • General expenses (electricity, bin collection, etc.)
  • Fees for software subscriptions and licenses
  • Investments
  • Tax payments

For each month, add up the individual transactions in each category, e.g. all salary payments to your employees in the category "Salary payments and wages". You then enter the result for the respective month in a table.

Proceed in this way for each category so that at the end you have an overview of the past six months.

Calculate the cash balance for each month

Then deduct the expenses from the revenues in each month:

  • Balance per month = Total revenue in month - total expenses in month
  • You offset the result against the cash balance of the previous month and then get the total cash balance, which shows you how much cash you have available in total for the respective month:
  • Total cash balance = Cash balance from previous month + cash balance from current month

Anticipate future cash flows

Once you have calculated the cash balance for the past six months, take a closer look at the values in the individual categories: In some cases, you will find that the expenses are the same or vary only slightly from month to month, e.g. salary payments and fees for software subscriptions.

You now enter these recurring expenses in your table for the coming months, because you can assume that they will remain the same. For all other categories where the values fluctuate strongly, you derive estimated values.

For the expected revenues, take into account how customer demand will develop. If you assume that this will increase, enter a larger value for revenue from sales in the coming months.

Once you have entered your expected values for all categories in the table, calculate the expected cash balance and the total cash balance. You will then see how much cash you will have available in the coming months. The more you know about your business and its development, the more accurate estimates you can make and the more accurate your cash flow plan will be.

Cash flow plan Example

The following table shows two months of how cash flow planning works in principle:

Cash flow balance at start of year: £3,000 January February
Revenue from sales £5,000 £6,000
Income from financial investments £500
Grants £200
Tax refunds £1,000
Licences £2,000 £2,000
Other revenues
TOTAL Revenues £8,500 £8,200
Salary payments and wages £2,000 £2,000
Inventory £1,000 £1,200
Expenses for marketing £500 £400
General expenses £500 £400
Fees for software £100 £100
Investments £4,000
Tax payments £500
TOTAL Expenses £4,100 £8,700
BALANCE per month £4,400 -£500
TOTAL cash balance = Balance from previous month + balance from current month £7,400 £6,900

Cash flow plan template

You can easily create such a table in Excel or download our free cash flow plan template here. You can adapt the table according to your needs, as there may be many more categories in your company.

It is important that you record all your revenues and expenses in the cash flow planning, because this is the only way to get an accurate overview of your current and future cash situation. How to work with a cash flow plan

Once you have completed the table and calculated the total cash balance for the coming months, you can see exactly how much cash you are likely to have available.

For example, if you assume that income will fall, you can see whether your cash will be sufficient to cover running costs or whether a cash shortage will arise. If you recognise such situations at an early stage, you can take measures beforehand so that the cash shortage does not arise in the first place.

On the other hand, you can also see how much cash you will have available for investments. With the help of the cash flow plan, you can estimate favourable times when making an investment will put the least strain on your liquidity. Your cash flow plan therefore helps you to optimally manage your operative business.

Digital tools to create a cash flow plan

You have probably noticed that creating a cash flow plan is very time-consuming because you first have to collect all income and expenses, enter them into categories and then offset them against each other. Errors can easily occur and distort the result.

With the help of a digital cash flow management tool, this process becomes easier. For example, Agicap's software automatically connects to all your business accounts and retrieves the transactions from there every day.

Recurring deposits and withdrawals are also automatically sorted into a category you define. The tool then also updates your cash flow plan based on the current transactions, so you have an up-to-date cash flow every day.

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