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Run » finance, how to create a financial forecast for a startup business plan.

Financial forecasting allows you to measure the progress of your new business by benchmarking performance against anticipated sales and costs.

When starting a new business, a financial forecast is an important tool for recruiting investors as well as for budgeting for your first months of operating. A financial forecast is used to predict the cash flow necessary to operate the company day-to-day and cover financial liabilities.

Many lenders and investors ask for a financial forecast as part of a business plan; however, with no sales under your belt, it can be tricky to estimate how much money you will need to cover your expenses. Here’s how to begin creating a financial forecast for a new business.

[Read more: Startup 2021: Business Plan Financials ]

Start with a sales forecast

A sales forecast attempts to predict what your monthly sales will be for up to 18 months after launching your business. Creating a sales forecast without any past results is a little difficult. In this case, many entrepreneurs make their predictions using industry trends, market analysis demonstrating the population of potential customers and consumer trends. A sales forecast shows investors and lenders that you have a solid understanding of your target market and a clear vision of who will buy your product or service.

A sales forecast typically breaks down monthly sales by unit and price point. Beyond year two of being in business, the sales forecast can be shown quarterly, instead of monthly. Most financial lenders and investors like to see a three-year sales forecast as part of your startup business plan.

Lower fixed costs mean less risk, which might be theoretical in business schools but are very concrete when you have rent and payroll checks to sign.

Tim Berry, president and founder of Palo Alto Software

Create an expenses budget

An expenses budget forecasts how much you anticipate spending during the first years of operating. This includes both your overhead costs and operating expenses — any financial spending that you anticipate during the course of running your business.

Most experts recommend breaking down your expenses forecast by fixed and variable costs. Fixed costs are things such as rent and payroll, while variable costs change depending on demand and sales — advertising and promotional expenses, for instance. Breaking down costs into these two categories can help you better budget and improve your profitability.

"Lower fixed costs mean less risk, which might be theoretical in business schools but are very concrete when you have rent and payroll checks to sign," Tim Berry, president and founder of Palo Alto Software, told Inc . "Most of your variable costs are in those direct costs that belong in your sales forecast, but there are also some variable expenses, like ads and rebates and such."

Project your break-even point

Together, your expenses budget and sales forecast paints a picture of your profitability. Your break-even projection is the date at which you believe your business will become profitable — when more money is earned than spent. Very few businesses are profitable overnight or even in their first year. Most businesses take two to three years to be profitable, but others take far longer: Tesla , for instance, took 18 years to see its first full-year profit.

Lenders and investors will be interested in your break-even point as a projection of when they can begin to recoup their investment. Likewise, your CFO or operations manager can make better decisions after measuring the company’s results against its forecasts.

[Read more: ​​ Startup 2021: Writing a Business Plan? Here’s How to Do It, Step by Step ]

Develop a cash flow projection

A cash flow statement (or projection, for a new business) shows the flow of dollars moving in and out of the business. This is based on the sales forecast, your balance sheet and other assumptions you’ve used to create your expenses projection.

“If you are starting a new business and do not have these historical financial statements, you start by projecting a cash-flow statement broken down into 12 months,” wrote Inc . The cash flow statement will include projected cash flows from operating, investing and financing your business activities.

Keep in mind that most business plans involve developing specific financial documents: income statements, pro formas and a balance sheet, for instance. These documents may be required by investors or lenders; financial projections can help inform the development of those statements and guide your business as it grows.

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Financial forecast example for new businesses and startups

The financial forecast is an essential step when creating a business plan. The financial forecast allows you to anticipate the revenues and expenses of your new business over a given period.

Even if the exercise is sometimes delicate to carry out, it is nevertheless essential for any entrepreneur. Indeed, it allows you to define quantified objectives, which, if meticulously tracked, will allow you to grow your business in good conditions.

To help you, here's a financial forecast example as well as tools you can use to create yours. 

Financial forecast examples for new businesses

Example of a sales forecast.

The sales forecast is used to estimate the company's turnover. It is generally presented by category of products and services, types of customers, or time slots.

In our financial forecast example, we have included below a sales forecast for a hostel, organised by categories of services with the bed's occupancy forecast broken down based on seasonality:

To ensure a fair and realistic evaluation of your company's revenues, You will need to base your forecast on thorough and reliable market analysis, including an analysis of what your competition offers. You will also need to think carefully about your pricing policy and distribution strategy beforehand.

Examples of financial statements to include in your forecast

Your forecast will need to include 3 financial statements:

• The P&L statement
• The cash flow statement
• The balance sheet

P&L statement

The profit and loss statement enables you to assess:

• the growth of the company by analyzing the evolution of the turnover over several years;
• the profitability of the company by looking at the difference between the expected revenues and the costs which will need to be incurred to generate these sales.

The main shortcoming of the projected income statement is that it does not take into account cash flows. Your profits should turn into cash at some point, but based on when your clients pay you, how much inventory you keep, or when you pay your suppliers, the cash flow could be very different from your profit.

To overcome this shortcoming, we need to look at the forecasted cash flow statement included in our financial forecast example.

Cash flow statement

The cash flow statement shows all anticipated cash movements for a given year.

It enables you to evaluate:

• the ability to generate operating cash flow;
• the company's investment and financing policies.

The cash flow statement is highly complementary to the P&L statement. Together they provide a clear view of the company's profitability, the cash generated by the operations, the investments made and the financing flows.

Balance sheet

The forecasted balance sheet, the last link in the chain, provides an overview of the company's net worth at a given moment in time and is part of our financial forecast example. It enables you to evaluate:

• the value of the company's assets;
• the weight of its working capital;
• the level of financial indebtedness;
• the book value of shareholders' equity.

The forecasted balance sheet complements the other two tables. Nevertheless, it has two weak points:

• It provides a snapshot of the company's net worth at a specific moment in time - giving a very static view of the company. Especially given the balance sheet is usually produced several months after the end of the financial year (and therefore the information it contains is already stale!)
• It gives an accounting vision of the company, based on historical cost, and not a financial vision, based on market value.

Where can I find other financial forecast examples?

At The Business Plan Shop, we offer an online software that includes a financial forecasting tool and helps you throughout the drafting of the business plan on top of financial forecast examples included in our business plan templates . 

Using a software like ours to realize your business plan has several advantages:

• You can easily create your financial forecast by letting the software take care of the calculations and financial aspects for you.
• You are guided in the drafting process by detailed instructions and examples for each part of the plan.
• You get a professional document, formatted and ready to be sent to your bank or investors.

If you are interested in our solution, you can try our software for free here .

Our article is coming to an end. We hope that our financial forecast example has given you a better understanding of what this exercise is all about.

The forecast is a crucial element of a business plan that will be of particular interest to your financial partners if you are looking for financing; but don't forget that it is also a mean for you, as an entrepreneur, to evaluate the viability of your new business idea.

Also on The Business Plan Shop

• How to do financial projections for a new business?
• How to establish a Profit & Loss forecast in your business plan?
• How to do a financial forecast for a restaurant?

Founder & CEO at The Business Plan Shop Ltd

Guillaume Le Brouster is a seasoned entrepreneur and financier.

Guillaume has been an entrepreneur for more than a decade and has first-hand experience of starting, running, and growing a successful business.

Prior to being a business owner, Guillaume worked in investment banking and private equity, where he spent most of his time creating complex financial forecasts, writing business plans, and analysing financial statements to make financing and investment decisions.

Guillaume holds a Master's Degree in Finance from ESCP Business School and a Bachelor of Science in Business & Management from Paris Dauphine University.

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How to Write a Small Business Financial Plan

Noah Parsons

3 min. read

Updated January 3, 2024

Creating a financial plan is often the most intimidating part of writing a business plan. It’s also one of the most vital. Businesses with well-structured and accurate financial statements in place are more prepared to pitch to investors, receive funding, and achieve long-term success.

Thankfully, you don’t need an accounting degree to successfully put your budget and forecasts together. Here is everything you need to include in your financial plan along with optional performance metrics, specifics for funding, and free templates.

• Key components of a financial plan

A sound financial plan is made up of six key components that help you easily track and forecast your business financials. They include your:

Sales forecast

What do you expect to sell in a given period? Segment and organize your sales projections with a personalized sales forecast based on your business type.

Subscription sales forecast

While not too different from traditional sales forecasts—there are a few specific terms and calculations you’ll need to know when forecasting sales for a subscription-based business.

Expense budget

Create, review, and revise your expense budget to keep your business on track and more easily predict future expenses.

How to forecast personnel costs

How much do your current, and future, employees’ pay, taxes, and benefits cost your business? Find out by forecasting your personnel costs.

Profit and loss forecast

Track how you make money and how much you spend by listing all of your revenue streams and expenses in your profit and loss statement.

Cash flow forecast

Manage and create projections for the inflow and outflow of cash by building a cash flow statement and forecast.

Balance sheet

Need a snapshot of your business’s financial position? Keep an eye on your assets, liabilities, and equity within the balance sheet.

What to include if you plan to pursue funding

Do you plan to pursue any form of funding or financing? If the answer is yes, then there are a few additional pieces of information that you’ll need to include as part of your financial plan.

Highlight any risks and assumptions

Every entrepreneur takes risks with the biggest being assumptions and guesses about the future. Just be sure to track and address these unknowns in your plan early on.

Plan your exit strategy

Investors will want to know your long-term plans as a business owner. While you don’t need to have all the details, it’s worth taking the time to think through how you eventually plan to leave your business.

• Financial ratios and metrics

With all of your financial statements and forecasts in place, you have all the numbers needed to calculate insightful financial ratios. While these metrics are entirely optional to include in your plan, having them easily accessible can be valuable for tracking your performance and overall financial situation.

Common business ratios

Unsure of which business ratios you should be using? Check out this list of key financial ratios that bankers, financial analysts, and investors will want to see.

Break-even analysis

Do you want to know when you’ll become profitable? Find out how much you need to sell to offset your production costs by conducting a break-even analysis.

How to calculate ROI

How much could a business decision be worth? Evaluate the efficiency or profitability by calculating the potential return on investment (ROI).

• Financial plan templates and tools

Download and use these free financial templates and calculators to easily create your own financial plan.

Sales forecast template

Download a free detailed sales forecast spreadsheet, with built-in formulas, to easily estimate your first full year of monthly sales.

Download Template

Accurate and easy financial forecasting

Get a full financial picture of your business with LivePlan's simple financial management tools.

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See why 1.2 million entrepreneurs have written their business plans with LivePlan

Noah is the COO at Palo Alto Software, makers of the online business plan app LivePlan. He started his career at Yahoo! and then helped start the user review site Epinions.com. From there he started a software distribution business in the UK before coming to Palo Alto Software to run the marketing and product teams.

Table of Contents

• What to include for funding

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7 Financial Forecasting Methods to Predict Business Performance

• 21 Jun 2022

Much of accounting involves evaluating past performance. Financial results demonstrate business success to both shareholders and the public. Planning and preparing for the future, however, is just as important.

Shareholders must be reassured that a business has been, and will continue to be, successful. This requires financial forecasting.

Here's an overview of how to use pro forma statements to conduct financial forecasting, along with seven methods you can leverage to predict a business's future performance.

What Is Financial Forecasting?

Financial forecasting is predicting a company’s financial future by examining historical performance data, such as revenue, cash flow, expenses, or sales. This involves guesswork and assumptions, as many unforeseen factors can influence business performance.

Financial forecasting is important because it informs business decision-making regarding hiring, budgeting, predicting revenue, and strategic planning . It also helps you maintain a forward-focused mindset.

Each financial forecast plays a major role in determining how much attention is given to individual expense items. For example, if you forecast high-level trends for general planning purposes, you can rely more on broad assumptions than specific details. However, if your forecast is concerned with a business’s future, such as a pending merger or acquisition, it's important to be thorough and detailed.

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Forecasting with Pro Forma Statements

A common type of forecasting in financial accounting involves using pro forma statements . Pro forma statements focus on a business's future reports, which are highly dependent on assumptions made during preparation⁠, such as expected market conditions.

Because the term "pro forma" refers to projections or forecasts, pro forma statements apply to any financial document, including:

• Income statements
• Balance sheets
• Cash flow statements

These statements serve both internal and external purposes. Internally, you can use them for strategic planning. Identifying future revenues and expenses can greatly impact business decisions related to hiring and budgeting. Pro forma statements can also inform endeavors by creating multiple statements and interchanging variables to conduct side-by-side comparisons of potential outcomes.

Externally, pro forma statements can demonstrate the risk of investing in a business. While this is an effective form of forecasting, investors should know that pro forma statements don't typically comply with generally accepted accounting principles (GAAP) . This is because pro forma statements don't include one-time expenses—such as equipment purchases or company relocations—which allows for greater accuracy because those expenses don't reflect a company’s ongoing operations.

7 Financial Forecasting Methods

Pro forma statements are incredibly valuable when forecasting revenue, expenses, and sales. These findings are often further supported by one of seven financial forecasting methods that determine future income and growth rates.

There are two primary categories of forecasting: quantitative and qualitative.

Quantitative Methods

When producing accurate forecasts, business leaders typically turn to quantitative forecasts , or assumptions about the future based on historical data.

1. Percent of Sales

Internal pro forma statements are often created using percent of sales forecasting . This method calculates future metrics of financial line items as a percentage of sales. For example, the cost of goods sold is likely to increase proportionally with sales; therefore, it’s logical to apply the same growth rate estimate to each.

To forecast the percent of sales, examine the percentage of each account’s historical profits related to sales. To calculate this, divide each account by its sales, assuming the numbers will remain steady. For example, if the cost of goods sold has historically been 30 percent of sales, assume that trend will continue.

2. Straight Line

The straight-line method assumes a company's historical growth rate will remain constant. Forecasting future revenue involves multiplying a company’s previous year's revenue by its growth rate. For example, if the previous year's growth rate was 12 percent, straight-line forecasting assumes it'll continue to grow by 12 percent next year.

Although straight-line forecasting is an excellent starting point, it doesn't account for market fluctuations or supply chain issues.

3. Moving Average

Moving average involves taking the average—or weighted average—of previous periods⁠ to forecast the future. This method involves more closely examining a business’s high or low demands, so it’s often beneficial for short-term forecasting. For example, you can use it to forecast next month’s sales by averaging the previous quarter.

Moving average forecasting can help estimate several metrics. While it’s most commonly applied to future stock prices, it’s also used to estimate future revenue.

To calculate a moving average, use the following formula:

A1 + A2 + A3 … / N

Formula breakdown:

A = Average for a period

N = Total number of periods

Using weighted averages to emphasize recent periods can increase the accuracy of moving average forecasts.

4. Simple Linear Regression

Simple linear regression forecasts metrics based on a relationship between two variables⁠: dependent and independent. The dependent variable represents the forecasted amount, while the independent variable is the factor that influences the dependent variable.

The equation for simple linear regression is:

Y ⁠ = Dependent variable⁠ (the forecasted number)

B = Regression line's slope

X = Independent variable

A = Y-intercept

5. Multiple Linear Regression

If two or more variables directly impact a company's performance, business leaders might turn to multiple linear regression . This allows for a more accurate forecast, as it accounts for several variables that ultimately influence performance.

To forecast using multiple linear regression, a linear relationship must exist between the dependent and independent variables. Additionally, the independent variables can’t be so closely correlated that it’s impossible to tell which impacts the dependent variable.

Qualitative Methods

When it comes to forecasting, numbers don't always tell the whole story. There are additional factors that influence performance and can't be quantified. Qualitative forecasting relies on experts’ knowledge and experience to predict performance rather than historical numerical data.

These forecasting methods are often called into question, as they're more subjective than quantitative methods. Yet, they can provide valuable insight into forecasts and account for factors that can’t be predicted using historical data.

6. Delphi Method

The Delphi method of forecasting involves consulting experts who analyze market conditions to predict a company's performance.

A facilitator reaches out to those experts with questionnaires, requesting forecasts of business performance based on their experience and knowledge. The facilitator then compiles their analyses and sends them to other experts for comments. The goal is to continue circulating them until a consensus is reached.

7. Market Research

Market research is essential for organizational planning. It helps business leaders obtain a holistic market view based on competition, fluctuating conditions, and consumer patterns. It’s also critical for startups when historical data isn’t available. New businesses can benefit from financial forecasting because it’s essential for recruiting investors and budgeting during the first few months of operation.

When conducting market research, begin with a hypothesis and determine what methods are needed. Sending out consumer surveys is an excellent way to better understand consumer behavior when you don’t have numerical data to inform decisions.

Improve Your Forecasting Skills

Financial forecasting is never a guarantee, but it’s critical for decision-making. Regardless of your business’s industry or stage, it’s important to maintain a forward-thinking mindset—learning from past patterns is an excellent way to plan for the future.

If you’re interested in further exploring financial forecasting and its role in business, consider taking an online course, such as Financial Accounting , to discover how to use it alongside other financial tools to shape your business.

Do you want to take your financial accounting skills to the next level? Consider enrolling in Financial Accounting —one of three courses comprising our Credential of Readiness (CORe) program —to learn how to use financial principles to inform business decisions. Not sure which course is right for you? Download our free flowchart .

About the Author

• Business Planning

Business Plan Financial Projections

Written by Dave Lavinsky

Financial projections are an important part of your business plan. The projections give investors and lenders an idea of how well your business is likely to do in the future. Financial projections include both income statements and balance sheets.

Financial projections are important for a number of reasons. First, they give investors and lenders an idea of how well your business is likely to do in the future. This can help you secure the funding you need to get your business off the ground. Financial projections also help you track your progress over time. You can use them to make sure your business is on track to meet its goals. Finally, financial projections can help you spot potential problems early on, so you can take corrective action.

What Are Business Plan Financial Projections?

Financial projections are an estimate of your company’s future financial performance through financial forecasting. They are typically used by businesses to secure funding, but can also be useful for internal decision-making and planning purposes. There are three main financial statements that you will need to include in your business plan financial projections:

1. Income Statement Projection

The income statement projection is a forecast of your company’s future revenues and expenses. It should include line items for each type of income and expense, as well as a total at the end.

There are a few key items you will need to include in your projection:

• Revenue: Your revenue projection should break down your expected sales by product or service, as well as by month. It is important to be realistic in your projections, so make sure to account for any seasonal variations in your business.
• Expenses: Your expense projection should include a breakdown of your expected costs by category, such as marketing, salaries, and rent. Again, it is important to be realistic in your estimates.
• Net Income: The net income projection is the difference between your revenue and expenses. This number tells you how much profit your company is expected to make.

Sample Income Statement

2. cash flow statement & projection.

The cash flow statement and projection are a forecast of your company’s future cash inflows and outflows. It is important to include a cash flow projection in your business plan, as it will give investors and lenders an idea of your company’s ability to generate cash.

There are a few key items you will need to include in your cash flow projection:

• The cash flow statement shows a breakdown of your expected cash inflows and outflows by month. It is important to be realistic in your projections, so make sure to account for any seasonal variations in your business.
• Cash inflows should include items such as sales revenue, interest income, and capital gains. Cash outflows should include items such as salaries, rent, and marketing expenses.
• It is important to track your company’s cash flow over time to ensure that it is healthy. A healthy cash flow is necessary for a successful business.

Sample Cash Flow Statements

3. balance sheet projection.

The balance sheet projection is a forecast of your company’s future financial position. It should include line items for each type of asset and liability, as well as a total at the end.

A projection should include a breakdown of your company’s assets and liabilities by category. It is important to be realistic in your projections, so make sure to account for any seasonal variations in your business.

It is important to track your company’s financial position over time to ensure that it is healthy. A healthy balance is necessary for a successful business.

Sample Balance Sheet

How to create financial projections.

Creating financial projections for your business plan can be a daunting task, but it’s important to put together accurate and realistic financial projections in order to give your business the best chance for success.  

Cost Assumptions

When you create financial projections, it is important to be realistic about the costs your business will incur, using historical financial data can help with this. You will need to make assumptions about the cost of goods sold, operational costs, and capital expenditures.

It is important to track your company’s expenses over time to ensure that it is staying within its budget. A healthy bottom line is necessary for a successful business.

Capital Expenditures, Funding, Tax, and Balance Sheet Items

You will also need to make assumptions about capital expenditures, funding, tax, and balance sheet items. These assumptions will help you to create a realistic financial picture of your business.

Capital Expenditures

When projecting your company’s capital expenditures, you will need to make a number of assumptions about the type of equipment or property your business will purchase. You will also need to estimate the cost of the purchase.

When projecting your company’s funding needs, you will need to make a number of assumptions about where the money will come from. This might include assumptions about bank loans, venture capital, or angel investors.

When projecting your company’s tax liability, you will need to make a number of assumptions about the tax rates that will apply to your business. You will also need to estimate the amount of taxes your company will owe.

Balance Sheet Items

When projecting your company’s balance, you will need to make a number of assumptions about the type and amount of debt your business will have. You will also need to estimate the value of your company’s assets and liabilities.

Financial Projection Scenarios

Write two financial scenarios when creating your financial projections, a best-case scenario, and a worst-case scenario. Use your list of assumptions to come up with realistic numbers for each scenario.

Presuming that you have already generated a list of assumptions, the creation of best and worst-case scenarios should be relatively simple. For each assumption, generate a high and low estimate. For example, if you are assuming that your company will have $100,000 in revenue, your high estimate might be $120,000 and your low estimate might be $80,000.

Once you have generated high and low estimates for all of your assumptions, you can create two scenarios: a best case scenario and a worst-case scenario. Simply plug the high estimates into your financial projections for the best-case scenario and the low estimates into your financial projections for the worst-case scenario.

Conduct a Ratio Analysis

A ratio analysis is a useful tool that can be used to evaluate a company’s financial health. Ratios can be used to compare a company’s performance to its industry average or to its own historical performance.

There are a number of different ratios that can be used in ratio analysis. Some of the more popular ones include the following:

• Gross margin ratio
• Operating margin ratio
• Return on assets (ROA)
• Return on equity (ROE)

To conduct a ratio analysis, you will need financial statements for your company and for its competitors. You will also need industry average ratios. These can be found in industry reports or on financial websites.

Once you have the necessary information, you can calculate the ratios for your company and compare them to the industry averages or to your own historical performance. If your company’s ratios are significantly different from the industry averages, it might be indicative of a problem.

Be Realistic

When creating your financial projections, it is important to be realistic. Your projections should be based on your list of assumptions and should reflect your best estimate of what your company’s future financial performance will be. This includes projected operating income, a projected income statement, and a profit and loss statement.

Your goal should be to create a realistic set of financial projections that can be used to guide your company’s future decision-making.

Sales Forecast

One of the most important aspects of your financial projections is your sales forecast. Your sales forecast should be based on your list of assumptions and should reflect your best estimate of what your company’s future sales will be.

Your sales forecast should be realistic and achievable. Do not try to “game” the system by creating an overly optimistic or pessimistic forecast. Your goal should be to create a realistic sales forecast that can be used to guide your company’s future decision-making.

Creating a sales forecast is not an exact science, but there are a number of methods that can be used to generate realistic estimates. Some common methods include market analysis, competitor analysis, and customer surveys.

Create Multi-Year Financial Projections

When creating financial projections, it is important to generate projections for multiple years. This will give you a better sense of how your company’s financial performance is likely to change over time.

It is also important to remember that your financial projections are just that: projections. They are based on a number of assumptions and are not guaranteed to be accurate. As such, you should review and update your projections on a regular basis to ensure that they remain relevant.

Creating financial projections is an important part of any business plan. However, it’s important to remember that these projections are just estimates. They are not guarantees of future success.

Business Plan Financial Projections FAQs

What is a business plan financial projection.

A business plan financial projection is a forecast of your company's future financial performance. It should include line items for each type of asset and liability, as well as a total at the end.

What are annual income statements? 

The Annual income statement is a financial document and a financial model that summarize a company's revenues and expenses over the course of a fiscal year. They provide a snapshot of a company's financial health and performance and can be used to track trends and make comparisons with other businesses.

What are the necessary financial statements?

The necessary financial statements for a business plan are an income statement, cash flow statement, and balance sheet.

How do I create financial projections?

You can create financial projections by making a list of assumptions, creating two scenarios (best case and worst case), conducting a ratio analysis, and being realistic.

7-step guide to financial forecasting & planning for any business

What is financial forecasting, why is it important, and how to properly conduct financial planning and forecasting

• What is financial forecasting?
• Why is it important?
• 4 common types of financial forecasting
• How to do financial forecasting in 7 steps
• Financial forecasting FAQs

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Uncertainty is one of the constant aspects of doing business. Many factors beyond your control can potentially influence the market in ways you didn't expect. For example, new technologies are constantly changing operations across almost all industries at a fundamental level. 

It pays to know what to expect in the near future and plan ahead, hence the need for financial forecasting. Every business (including monopolies) could benefit incredibly from regular  financial forecasting . Here is a comprehensive guide on the importance of financial forecasting for your business model and how to do it.

Failure to conduct regular financial forecasting leaves you flying blind.

What is financial forecasting? 

Financial forecasting refers to financial projections performed to facilitate any decision-making relevant for determining future business performance. The financial forecasting process includes the analysis of past business performance, current  business trends , and other relevant factors.

However, some aspects of financial forecasting may change depending on the type and purpose of the forecast, as will be discussed later. 

Importance of financial forecasting 

Hypothetically speaking, failure to conduct regular financial forecasting leaves you flying blind. Regular forecasting has extensive benefits for some of your business' fundamental operations, including: 

Annual budget planning 

A budget represents your business' cash flow, financial positions, and future goals and expectations for a set fiscal period.  Financial forecasting and planning  work in tandem, as forecasting essentially offers an insight into your business' future—these insights help make budgeting accurate.  

Establishing realistic business goals 

Accurate forecasting will help predict whether (and by how much) your business will grow or decline. As such, you can set realistic and achievable goals—and manage your expectations. 

Identifying problem areas 

Financial forecasting  can help you identify ongoing problems by analyzing the business' past performance. Additionally, you can identify potential problems by getting an insight into what the future holds. 

Reduction of financial risk 

You risk overspending by creating a budget without financial forecasting. In fact, most of your financial decisions would be ill-informed without the input of a financial forecast's results. 

Greater company appeal to attract investors 

Investors use a company's financial forecast to predict its future performance—and the potential ROIs on their investments. Additionally, regular forecasting shows your investors that you are in control and have a solid business plan prepared for the future.

4 common types of financial forecasting 

Businesses conduct financial forecasting for varying purposes. Consequently, forecasting practices are categorized into four types: 

1. Sales forecasting 

Sales forecasting entails predicting the amounts of products/services you expect to sell within a projected fiscal period. There are two sales forecasting methodologies: top-down forecasting and bottom-up forecasting. 

Sales forecasting has many uses and benefits, including budgeting and planning production cycles. It also helps companies manage and allocate resources more efficiently. 

2. Cash flow forecasting 

Cash flow forecasting  entails estimating the flow of cash in and out of the company over a set fiscal period. It's based on factors such as income and expenses. It has many uses and benefits, including identifying immediate funding needs and budgeting. However, it is worth noting that cash flow financial forecasting is more accurate over a short term. 

3. Budget forecasting 

As a financial guide for your business' future, a budget creates certain expectations about your company's performance. Budget forecasting aims to determine the ideal outcome of the budget, assuming that everything proceeds as planned. It relies on the budget's data, which relies on financial forecasting data. 

4. Income forecasting 

Income forecasting entails analyzing the company's past revenue performance and current growth rate to estimate future income. It is integral to doing  cash flow  and balance sheet forecasting. Additionally, the company's investors, suppliers, and other concerned third parties use this data to make crucial decisions. For example, suppliers use it when determining how much to credit the company in supplies. 

How to do financial forecasting in 7 steps 

Many integral aspects of your company's current and future operations hinge on the results of your financial forecasts. For example, forecasting results will influence investors' decisions, determine how much your company can get in credit, and more. 

As such, accuracy cannot be overemphasized. Here is a step-by-step guide to ensure that you do it right: 

1. Define the purpose of a financial forecast 

What do you hope to learn from the financial forecast? Do you hope to estimate how many units of your products or services you will sell? Or perhaps you wish to see how the company's current budget will shape its future? Defining your financial forecast's purpose is essential to determining which metrics and factors to consider when doing it. 

2. Gather past financial statements and historical data 

One of the components of financial forecasting involves analyzing past financial data, as explained. As such, it is important to gather all relevant historical  data and records , including: 

• Liabilities 
• Investments 
• Expenditures 
• Comprehensive income 
• Earnings per share 
• Fixed costs

It's important to ensure that you gather all required information as your financial forecast's results will be inaccurate if you exclude relevant data.

3. Choose a time frame for your forecast 

Financial forecasts are designed to give business owners an insight into the company's future. You get to decide how far into the future to look, and it can range from several weeks to several years. However, most companies do forecasts for one fiscal year. 

Financial forecasts change over time as factors such as business and market trends change. Consequently, it is worth noting that financial forecasting is more accurate in the short term than in the long term.

4. Choose a financial forecast method 

There are two financial forecasting methods: 

• Quantitative forecasting uses historical information and data to identify trends, reliable patterns, and trends. 
• Qualitative forecasting analyzes experts' opinions and sentiments about the company and market as a whole. 

Each method is suitable for different uses and has its strengths and shortcomings. However, qualitative forecasting is more suitable for startups without past data to which they can refer. 

5. Document and monitor results 

Financial forecasts are never 100% accurate and tend to change over time. As such, it is important to document and monitor your forecast's results over time, especially after major internal and external developments. It is also important to update your forecasts to reflect the latest developments. Using  forecasting software  to automate related tasks may help too.

6. Analyze financial data 

Regularly analyzing financial data is the best way to tell whether your financial forecasts are accurate. Additionally, continuous financial management and analysis helps you prepare better for the next financial forecast and gives you crucial insights into the company's current financial performance. 

7. Repeat based on the previously defined time frame 

Smart companies conduct regular financial forecasting to stay in the know and in control. As such, it is advisable to repeat the process once the time period set for the current financial forecast elapses. It's also prudent to keep collecting, recording, and analyzing data to improve your financial forecasts' accuracy.

Get accurate metrics for financial forecasting—absolutely free 

An efficient system of collecting, storing, and analyzing data is necessary for accurate financial forecasting. ProfitWell Metrics is a subscription analytics software designed to do all of this on one platform. Some of the metrics that you can get using this program include: 

• Monthly and annual recurring revenues 
• Market and customer segments 
• Customer acquisition and retention 
• Customer lifetime value 
• Churn rate 
• The average revenue per user 

ProfitWell Metrics collects and records all  important metrics , giving you enough data to work with when conducting a financial forecast. Additionally, the data collected in real-time offers crucial insights to help you update your forecasts and other projects accordingly. 

ProfitWell Metrics also integrates seamlessly with other popular data analytics programs, including Google Sheets and Stripe. More importantly, it's 100% free and secure. 

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Financial forecasting FAQs 

Some of the most frequently asked questions regarding financial forecasting include: 

What is the role of forecasting in financial planning? 

Financial forecasting estimates important financial metrics such as sales, income, and future revenue. These metrics are crucial for finance-related operations such as budgeting and financial planning as a whole. Consequently, forecasting functions as a guiding tool (or marking scheme) for financial planning. 

What is the difference between financial forecasting and modeling? 

On the one hand, financial forecasting entails predicting the business' future performance. On the other hand, financial modeling entails simulating how financial forecasts and other data may affect the company's future if everything goes according to plan. Financial modeling is done for very specific and often discrete purposes. 

What is the difference between financial forecasting and budgeting? 

Financial forecasting and budgeting work in tandem and are often misinterpreted as meaning the same thing. However, financial forecasting entails estimating and predicting the company's future performance (financially and in other aspects). On the other hand, budgeting is the company's financial expectations for the future (expectations based on financial forecasts and other data). 

What are the three pro forma statements needed for financial forecasting? 

Pro forma statements are financial reports designed to give insights into how different scenarios would play out based on hypothetical circumstances. There are three pro forma statements: 

• Pro forma statements of income 
• Pro forma cash flow statements 
• Pro forma balance sheets 

Pro forma statements may be hypothetical, but they help companies prepare for an uncertain future. Consequently, they're useful when conducting financial forecasts. 

Related reading

Original text

Financial projections use existing or estimated financial data to forecast your business’s future income and expenses. They often include different scenarios to see how changes to one aspect of your finances (such as higher sales or lower operating expenses) might affect your profitability.

If you need to create financial projections for a startup or existing business, this free, downloadable template includes all the necessary tools.

What Are Financial Projections Used for?

Financial projections are an essential business planning tool for several reasons.

• If you’re starting a business, financial projections help you plan your startup budget, assess when you expect the business to become profitable, and set benchmarks for achieving financial goals.
• If you’re already in business, creating financial projections each year can help you set goals and stay on track.
• When seeking outside financing, startups and existing businesses need financial projections to convince lenders and investors of the business’s growth potential.

What’s Included in Financial Projections?

This financial projections template pulls together several different financial documents, including:

• Startup expenses
• Payroll costs
• Sales forecast
• Operating expenses for the first 3 years of business
• Cash flow statements for the first 3 years of business
• Income statements for the first 3 years of business
• Balance sheet
• Break-even analysis
• Financial ratios
• Cost of goods sold (COGS), and
• Amortization and depreciation for your business.

You can use this template to create the documents from scratch or pull in information from those you’ve already made. The template also includes diagnostic tools to test the numbers in your financial projections and ensure they are within reasonable ranges.

These areas are closely related, so as you work on your financial projections, you’ll find that changes to one element affect the others. You may want to include a best-case and worst-case scenario for all possibilities. Make sure you know the assumptions behind your financial projections and can explain them to others.

Startup business owners often wonder how to create financial projections for a business that doesn’t exist yet. Financial forecasts are continually educated guesses. To make yours as accurate as possible, do your homework and get help. Use the information you unearthed in researching your business plans, such as statistics from industry associations, data from government sources, and financials from similar businesses. An accountant with experience in your industry can help fine-tune your financial projections. So can business advisors such as SCORE mentors.

Once you complete your financial projections, don’t put them away and forget about them. Compare your projections to your financial statements regularly to see how well your business meets your expectations. If your projections turn out to be too optimistic or too pessimistic, make the necessary adjustments to make them more accurate.

*NOTE: The cells with formulas in this workbook are locked. If changes are needed, the unlock code is "1234." Please use caution when unlocking the spreadsheets. If you want to change a formula, we strongly recommend saving a copy of this spreadsheet under a different name before doing so. 

We recommend downloading the  Financial Projections Template Guide in English  or  Espanol .

Do you need help creating your financial projections? Take SCORE’s online course on-demand on financial projections or connect with a SCORE mentor  online or in your community today.

Simple Steps for Starting Your Business: Financial Projections In this online module, you'll learn the importance of financial planning, how to build your financial model, how to understand financial statements and more.

Business Planning & Financial Statements Template Gallery Download SCORE’s templates to help you plan for a new business startup or grow your existing business.

Why Projected Financial Statements Are Essential to the Future Success of Startups Financial statements are vital to the success of any company but particularly start-ups. SCORE mentor Sarah Hadjhamou shares why they are a big part of growing your start-up.

Copyright © 2024 SCORE Association, SCORE.org

Funded, in part, through a Cooperative Agreement with the U.S. Small Business Administration. All opinions, and/or recommendations expressed herein are those of the author(s) and do not necessarily reflect the views of the SBA.

How to Create a Financial Forecast

Bryce Warnes

Reviewed by

July 15, 2022

This article is Tax Professional approved

Maybe your goal is world domination. Maybe you just want a sustainable side hustle. Either way, financial forecasting helps you understand the steps you need to take—and the numbers you need to hit—to make growth happen for your business.

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Plus, if you ever go looking for more funding, you’ll need financial forecasts to prove that your business is on track for growth.

Here’s everything you need on hand, and the steps you can take, to produce a reliable financial forecast.

What is a financial forecast?

A financial forecast tries to predict what your business will look like (financially) in the future. Pro forma financial statements are how you make those predictions somewhat concrete.

Pro forma statements are just like the financial statements you use each month to see how your business is performing. The only difference is that you prepare pro forma statements in advance, for future months and years.

There are three key pro forma statements you should be familiar with:

• The Income Statement
• The Cash Flow Statement
• The Balance Sheet

Helpful resource: How to Read and Analyze Financial Statements

Depending on your goals, these statements will cover different time spans. If you’re creating a financial forecast for your planning purposes, you should create pro forma statements covering six months to one year in the future.

If you’re presenting your forecast to a lender or investor, though, you should create pro forma statements covering the next one to three years.

Financial forecasting vs. budgeting

When you create a budget for your business , you plan to set aside money for certain costs, taking into account your income and expenses. The budget you make may be based on info from your financial forecast, but it’s distinct from the forecast itself.

Think of financial forecasting as a prediction, and budgeting as a plan. When you make a financial forecast, you see what direction your business is headed in, based on past performance and other factors, and use that to anticipate the future.

When you make a budget, you plan how you’re going to spend money based on what you expect your finances to look like in the future (your forecast).

For instance, if your financial forecast for next year says you’ll have an extra $5,000 in revenue, you might create a budget to decide how it will be spent—$2,000 for a new website, $1,000 for Facebook ads, and so on.

Three steps to creating your financial forecast

Ready to peer into the crystal ball and see the future of your business? There are three steps you need to follow:

• Gather your past financial statements. You’ll need to look at your past finances in order to project your income, cash flow, and balance.
• Decide how you’ll make projections. Besides past records, there’s other data you can draw on to make your projections more accurate.
• Prepare your pro forma statements. Pour a coffee and get ready to crunch some numbers.

Step one: Gather your records

If you’re not looking into the past to see how your business has grown, you’re not really forecasting—you’re just guessing.

You’ll need to gather past financial statements so you can see how your business has developed over time, and then project that development into the future.

Your bookkeeper or bookkeeping software should generate financial statements for you. If you don’t have either, and you don’t have financial statements, you’ll need to take care of that before you can start forecasting. You need complete bookkeeping in order to get the transaction history you base your financial statements on.

Put aside the task for financial forecasting for the moment, and learn how to catch up on your bookkeeping .

Once your books and financial statements are up to date, you’ll have everything you need to start planning for the future.

Step two: Decide how you’ll make your forecast

Depending what resources you choose to use, the type of forecast you create will fall between two poles— historical and researched-based.

Almost every financial forecast includes a little bit of historical forecasting, and a little bit that’s research-based. The blend you choose will depend on your needs and the resources at your disposal.

Remember, the goal is to create a realistic, useful forecast—without breaking the bank or eating up all your time.

Historical forecasting

When you use your financial history to plot the future, it’s historical forecasting . You’re looking at your last few annual Income Statements, Cash Flow Statements, and Balance Sheets to see how fast you’ve grown in the past. From there, you can make a guess about how fast you’ll grow this year.

The benefit of this is that it’s relatively easy to do and doesn’t take a lot of time, money, or expertise. The drawback is that you’re only using info about your own business, and not looking at broader market trends—like what your competition has been up to.

Historical forecasting is a good bet if you’re forecasting for modest growth, or else creating a quick-and-dirty forecast for your own use—not putting together a presentation for potential investors.

Research-based forecasting

When you do research about broader market trends, you’re using research-based forecasting . You may look at how your industry has performed over the past ten years, investigate new technologies and consumer trends, or try to measure the progress of your competitors. You might look at how companies similar to yours have planned their own growth.

The benefit of research-based forecasting is that you get a detailed, nuanced view of how your business could grow, taking into account a lot of different factors. And it’s the kind of forecast that investors and lenders want to see.

The drawback is that researched-based forecasting can be expensive. You may find you need to hire outside consultants and researchers to handle the heavy lifting.

Research-based forecasting is a good choice if you’re courting investors, or planning on rapid, aggressive growth. It’s also good if your company is brand new, and doesn’t have a lot of financial history to draw on for making projections

Step three: Create pro forma statements

Once you’ve collected the information you need to build your forecast, you can create pro forma statements.

We’ll cover the three key financial statements here. Whether you use all of them is up to you.

If you’re creating a quick forecast for your own planning, you may only need to create pro forma Income Statements. If you’re presenting to lenders or investors, you’ll want to use all three.

Rule of thumb: Any form you’d use in the month-to-month operation of your business should be created pro forma. For instance, if you move a lot of cash around every month, and you rely on Cash Flow Statements to make sure you’ve got enough money on hand to pay your vendors, then it’s wise to create pro forma Cash Flow Statements as part of your forecast.

Creating the pro forma Income Statement

First, set a goal—a projection—for sales in the period you’re looking at.

Let’s say you made $30,000 in sales this year. Next year, you want to make $60,000. So, your total sales will increase by $30,000.

Set a production schedule that will let you reach that goal, and map it out over the time period you’re covering. In our example, there will be 12 Income Statements in the year to come (one each month). Map out that $30,000 increase in sales over the 12 statements.

You could do this by increasing sales a fixed amount every month, or gradually increasing the amount of sales you make per month. It’s up to your instincts and experience as a business owner.

Then, it’s time for the “loss” part of “ profit and loss .” Calculate the cost of goods sold for each month, and deduct it from your sales. Deduct any other operating expenses you have, as well.

It’s important to take every expense into account so you get an accurate projection. If part of your plan is quadrupling your online advertising, be sure to include an expense that reflects that.

Once you’re done, your pro Forma Income Statements show you how much you can expect to earn and how much you can expect to spend in the time ahead.

Example Pro Forma Income Statement:

Karen’s Falafel Warehouse

Creating the pro forma Cash Flow Statement

You create a pro forma Cash Flow Statement a lot like the way you’d create a regular Cash Flow Statement. That means taking info from the Income Statement, and using the Cash Flow Statement format to plot out where your money is going, and how much you’ll have on hand at any one time.

Your projected cash flow can tell you a few things. If it’s in the negative, it means you’re not going to have enough cash on-hand to run your business, according to your current trajectory. You’ll need to make plans to borrow money and pay it off.

If your net cash flow is positive, you can plan on having enough surplus cash on hand to pay off loans, or save for a big investment.

Example Pro Forma Cash Flow Statement:

Ruth’s Raccoon Rescue and Rehabilitation Center

Creating the pro forma Balance Sheet

Drawing on info from the Income Statement and the Cash Flow Statement lets you create pro forma Balance Sheets. But you’ll also need previous Balance Sheets to make this useful—so you can follow the story of how your business got from “Balance A” to “Balance B.”

The Balance Sheet will project changes in your business accounts over time. That way, you can plan where to move money, when.

Example Pro Forma Balance Sheet:

Big Bill’s Budget Wedding Videos

Forecast vs. actuals

Once you’ve created a financial forecast, your work isn’t done. The vital second stage is to go back and record what your actual financials were in comparison to your forecast once the month or year is over.

Why is this so vital?

It helps you learn to forecast better next year, and when your forecast is way off, you can take notes for yourself on why that was.

For example:

• March revenue was much higher than I forecasted for. I didn’t realize there would be a seasonal boost over spring break.
• Sales were lower than I forecasted in the June. There was a miscommunication with the supplier and I didn’t have all the inventory I needed.

These mundane notes to yourself accumulate into invaluable business knowledge that help make every year more successful than the last.

Best, worst, and normal case projections

Whether you’re the kind of person who always sees the glass half full, or the kind who always sees it half empty, it’s a good idea to take into account different possible outcomes for your business.

Humans aren’t very good at predicting the future. Consider creating three different forecasts: One for the best case scenario, one for the worst, and one for the middle or “regular” scenario.

• Maybe the t-shirts you buy wholesale for your online store go up in price, like they did last year. Factor that into your worst case scenario .
• Maybe t-shirt prices stay the same, plus your new advertising plan takes off, and you get more business. Consider that the best case.
• Maybe everything more or less stays the same. Let’s call that the regular case.

The best/worst/regular trifecta is also useful when you’re making a budget for your business. For example, in January you might budget for a regular scenario. In this case, that means monthly sales revenue of $8,000.

However, in February say your revenue hits $10,000, and in March it’s $11,000. At that point, you may want to adjust your budget to the best case to scenario—since you’ll now have more money to reinvest in your business.

At the end of the day, the more robust your forecast, the better you’ll be able to plan the future of your business, and think on your feet. Plus, you’ll impress investors and lenders, by proving you’ve considered (almost) every possible outcome.

The better you understand how financial statements work, the easier you’ll find it to create financial forecasts. Before you start forecasting, take a look at our other helpful resources for understanding your small business financials:

• Financial Literacy 101 for Small Business Owners
• 10 Financial Ratios Every Small Business Owner Should Know

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Business Plan Financial Projections: How To Create Accurate Targets

• Written by Keith Murphy
• 16 min read

Small businesses and startups have a lot riding on their ability to create effective and accurate financial projections as part of their business plan. Solid financials are a strong enticement for investors, after all, and can help new businesses chart a course that will take them beyond the legendendarily difficult first year and into a productive and profitable future.

But the need for business owners to look ahead in order to secure funding, increase profits, and make intelligent financial decisions doesn’t end when startups become full-fledged businesses—and business plan financial projections aren’t just for startups. Existing businesses can also put them to good use by harvesting insights from their existing financial statements and creating sales projections and other financial forecasts that guide and improve their ongoing business planning.

What Are Business Plan Financial Projections?

Successful companies plan ahead, looking as best they can into the near and distant future to chart a course to growth, innovation, and competitive strength. Financial projections, both as part of an initial business plan and as part of ongoing business planning, use a company’s financial statements to help business owners forecast their upcoming expenses and revenue in a strategically useful way.

Most businesses use two types of financial projections:

• Short-term projections are broken down by month and generally cover the coming 12 months. They provide a guide companies can use to monitor and adjust their financial activity to set and hit targets for the financial year. In the first year, short-term projections will be entirely estimated, but in subsequent years, historical data can be used to help fine-tune them for greater accuracy and strategic utility.
• Long-term projections are focused on the coming three to five years and are generally used to secure investment (both initial and ongoing), provide a strategic roadmap for the company’s growth, or both.

For startups, creating financial projections is part of their initial business plan. Providing financial forecasts banks and potential investors can use to determine the financial viability of a business is key to obtaining financing and investments needed to get the business off the ground.

For existing businesses—for whom an initial business plan has evolved into business planning—financial projections are useful in attracting investors who want to see clear estimates for upcoming revenue, expenses, and potential growth. They’re also helpful in securing loans and lines of credit from financial institutions for the same reason. And even if you’re not trying to get funding or investments, financial projections provide a useful framework for building budgets focused on growth and competitive advantage.

So whether you’re a small business owner, an aspiring tycoon starting a new business, or part of the financial team at a well-established corporation, what matters most is viewing financial projections as a living, breathing reference tool that can help you plan and budget for growth in a realistic way while still setting aspirational goals for your business.

Financial projections, both as part of an initial business plan and as part of ongoing business planning, use a company’s financial statements to help business owners forecast their upcoming expenses and revenue in a strategically useful way.

Financial Projections: Core Components

Whether you’re preparing them as part of your business plan or to enhance your business planning, you’ll need the same financial statements to prepare financial projections: an income statement, a cash-flow statement, and a balance sheet.

• Income statements , sometimes called profit and loss statements , provide detailed information on your company’s revenue and expenses for a given period (e.g., a quarter, year, or multi-year period).
• Cash flow statements provide a comprehensive view of cash flowing into and out of a business. They record all cash flow from operations, investment, and financing activities.
• Balance sheets are used to showcase a company’s assets, liabilities, and owner’s equity for a specific period.

How to Create Financial Projections

The process of creating financial projections is the same whether you’re drafting a business plan or creating forecasts for an existing business. The primary difference is whether you’ll draw on your own research and expertise (a new business or startup business) or use historical data (existing businesses).

Keep in mind that while you’ll create the necessary documents separately, you’ll most likely finish them by consulting each of them as needed. For example, your sales forecast might change once you prepare your cash-flow statement. The best approach is to view each document as both its own piece of the financial projection puzzle and a reference for the others; this will help ensure you can assemble comprehensive and clear financial projections.

1. Start with a Sales Projection

A sales forecast is the first step in creating your income statement. You can start with a one, three, or five-year projection, but keep in mind that, without historical financial data, accuracy may decrease over time. It’s best to start with monthly income statements until you reach your projected break-even , which is the point at which revenue exceeds total operating expenses and you show a profit. Once you hit the break-even, you can transition to annual income statements.

Also, keep in mind factors outside of sales; market conditions, global environmental, political, and health concerns, sourcing challenges (including pricing changes and increased variable costs) and other business disruptors can put the kibosh on your carefully constructed forecasts if you leave them out of your considerations.

Start with a reasonable estimate of the units sold for the forecast period, and multiply them by the price per unit. This value is your total sales for the period.

Next, estimate the total cost of producing these units (i.e., the cost of goods sold , or COGS; sometimes called cost of sales ) by multiplying the per-unit cost by the number of units produced.

Deducting your COGS from your estimated sales yields your gross profit margin.

From the gross margin, subtract expenses such as wages, marketing costs, rent, and other operating expenses. The result is your projected operating income , or net income .

Using these figures, you can create an income statement:

2. Cash Flow Statement

Tracking your estimated cash inflows and outflows from investment and financing, combined with the cash generated by business operations, is the purpose of a cash flow projection .

Investment activities might include, for example, purchasing real estate or investing in research and development outside of daily operations.

Financing activities include cash inflows from investor funding or business loans, as well as cash outflows to repay debts or pay dividends to shareholders.

A reliable and accurate cash flow projection is essential to managing your working capital effectively and ensuring you have all the cash you need to cover your ongoing obligations while still having enough left to invest in growth and innovation or cover emergencies.

Drawing from our income statement, we can create a basic cash flow statement:

3. The Balance Sheet

Providing a “snapshot” of your businesses’ financial performance for a given period of time, the balance sheet contains your company’s assets, liabilities, and owner’s equity.

Assets include inventory, real estate, and capital, while liabilities represent financial obligations and include accounts payable, bank loans, and other debt.

Owner’s equity represents the amount remaining once liabilities have been paid.

Ideally, over time your company’s balance sheet will reflect your growth through a reduction of liabilities and an increase in owner’s equity.

We can complete our triumvirate of financial statements with a basic balance sheet:

Best Practices for Effective Financial Projections

Like a lot of other business processes, financial planning can be complex, time-consuming, and even frustrating if you’re still using manual workflows and paper documents or basic spreadsheet-style applications such as Microsoft Excel. You can get free templates for basic financial projections from the Service Corps of Retired Executives (SCORE), but even templates can only take you so far.

Without a doubt, the best advantage you can give yourself in creating effective and accurate financial projections—whether they’re for the financial section of your business plan or simply part of your ongoing business planning—is to invest in comprehensive procure-to-pay (P2P) software such as Planergy.

In addition to helpful templates, best-in-class P2P software also provides a rich array of real-time data analysis, reporting, and forecasting tools that make it easy to transform historical data (or market research) into accurate forecasts. In addition, artificial intelligence and process automation make it easy to collect, organize, manage and share your data with all internal stakeholders, so everyone has the information they need to create the most useful and complete forecasts and projections possible.

Beyond investing in P2P software, you can also improve the quality and accuracy of your financial projections by:

• Doing your homework. Invest in financial statement analysis and ratio analysis, with a focus not just on your own company, but your industry and the market in general. Learn the current ratios used for liquidity analysis, profitability, and debt and compare them to your own to get a more nuanced and useful understanding of how your company performs internally and within the context of the marketplace.
• Keeping it real. It can be all too easy to get carried away with pie-in-the-sky optimism when forecasting the future of your business. Rose-colored glasses aren’t exclusive to startups and small businesses; over-inflated estimates can hobble even veteran organizations if they don’t practice good data discipline and temper their hopes with practical considerations. Focus on creating realistic, but positive, projections, and you won’t have to worry about investors or lenders glancing askance at your hard work.
• Hoping for the best, but planning for the worst. Run two scenarios when performing your financial projections: the best-case scenario where everything goes perfectly to plan, and a worse-case scenario where Murphy’s Law holds sway. While actual performance will undoubtedly fall somewhere in between the two, having an upper and lower boundary appeals to investors and lenders who are assessing your company’s financial viability.

Financial Projections Help You Reach Your Goals for Growth

From startups to global corporations, every business needs reliable tools for financial forecasting. Take the time to create well-researched, data-driven financial projections, and you’ll be well-equipped to attract investors, secure funding, and chart a course for greater profits, growth, and performance in today’s competitive marketplace.

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• Building Your Business

How To Create Financial Projections for Your Business

Learn how to anticipate your business’s financial performance

• Understanding Financial Projections & Forecasting

Why Forecasting Is Critical for Your Business

Key financial statements for forecasting, how to create your financial projections, frequently asked questions (faqs).

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Just like a weather forecast lets you know that wearing closed-toe shoes will be important for that afternoon downpour later, a good financial forecast allows you to better anticipate financial highs and lows for your business.

Neglecting to compile financial projections for your business may signal to investors that you’re unprepared for the future, which may cause you to lose out on funding opportunities.

Read on to learn more about financial projections, how to compile and use them in a business plan, and why they can be crucial for every business owner.

Key Takeaways

• Financial forecasting is a projection of your business's future revenues and expenses based on comparative data analysis, industry research, and more.
• Financial projections are a valuable tool for entrepreneurs as they offer insight into a business's ability to generate profit, increase cash flow, and repay debts, which can be attractive to investors.
• Some of the key components to include in a financial projection include a sales projection, break-even analysis, and pro forma balance sheet and income statement.
• A financial projection can not only attract investors, but helps business owners anticipate fixed costs, find a break-even point, and prepare for the unexpected.

Understanding Financial Projections and Forecasting

Financial forecasting is an educated estimate of future revenues and expenses that involves comparative analysis to get a snapshot of what could happen in your business’s future.

This process helps in making predictions about future business performance based on current financial information, industry trends, and economic conditions. Financial forecasting also helps businesses make decisions about investments, financing sources, inventory management, cost control strategies, and even whether to move into another market.

Developing both short- and mid-term projections is usually necessary to help you determine immediate production and personnel needs as well as future resource requirements for raw materials, equipment, and machinery.

Financial projections are a valuable tool for entrepreneurs as they offer insight into a business's ability to generate profit, increase cash flow, and repay debts. They can also be used to make informed decisions about the business’s plans. Creating an accurate, adaptive financial projection for your business offers many benefits, including:

• Attracting investors and convincing them to fund your business
• Anticipating problems before they arise
• Visualizing your small-business objectives and budgets
• Demonstrating how you will repay small-business loans
• Planning for more significant business expenses
• Showing business growth potential
• Helping with proper pricing and production planning

Financial forecasting is essentially predicting the revenue and expenses for a business venture. Whether your business is new or established, forecasting can play a vital role in helping you plan for the future and budget your funds.

Creating financial projections may be a necessary exercise for many businesses, particularly those that do not have sufficient cash flow or need to rely on customer credit to maintain operations. Compiling financial information, knowing your market, and understanding what your potential investors are looking for can enable you to make intelligent decisions about your assets and resources.

The income statement, balance sheet, and statement of cash flow are three key financial reports needed for forecasting that can also provide analysts with crucial information about a business's financial health. Here is a closer look at each.

Income Statement

An income statement, also known as a profit and loss statement or P&L, is a financial document that provides an overview of an organization's revenues, expenses, and net income.

Balance Sheet

The balance sheet is a snapshot of the business's assets and liabilities at a certain point in time. Sometimes referred to as the “financial portrait” of a business, the balance sheet provides an overview of how much money the business has, what it owes, and its net worth.

The assets side of the balance sheet includes what the business owns as well as future ownership items. The other side of the sheet includes liabilities and equity, which represent what it owes or what others owe to the business.

A balance sheet that shows hypothetical calculations and future financial projections is also referred to as a “pro forma” balance sheet.

Cash Flow Statement

A cash flow statement monitors the business’s inflows and outflows—both cash and non-cash. Cash flow is the business’s projected earnings before interest, taxes, depreciation, and amortization ( EBITDA ) minus capital investments.

Here's how to compile your financial projections and fit the results into the three above statements.

A financial projections spreadsheet for your business should include these metrics and figures:

• Sales forecast
• Balance sheet
• Operating expenses
• Payroll expenses (if applicable)
• Amortization and depreciation
• Cash flow statement
• Income statement
• Cost of goods sold (COGS)
• Break-even analysis

Here are key steps to account for creating your financial projections.

Projecting Sales

The first step for a financial forecast starts with projecting your business’s sales, which are typically derived from past revenue as well as industry research. These projections allow businesses to understand what their risks are and how much they will need in terms of staffing, resources, and funding.

Sales forecasts also enable businesses to decide on important levels such as product variety, price points, and inventory capacity.

Income Statement Calculations

A projected income statement shows how much you expect in revenue and profit—as well as your estimated expenses and losses—over a specific time in the future. Like a standard income statement, elements on a projection include revenue, COGS, and expenses that you’ll calculate to determine figures such as the business’s gross profit margin and net income.

If you’re developing a hypothetical, or pro forma, income statement, you can use historical data from previous years’ income statements. You can also do a comparative analysis of two different income statement periods to come up with your figures.

Anticipate Fixed Costs

Fixed business costs are expenses that do not change based on the number of products sold. The best way to anticipate fixed business costs is to research your industry and prepare a budget using actual numbers from competitors in the industry. Anticipating fixed costs ensures your business doesn’t overpay for its needs and balances out its variable costs. A few examples of fixed business costs include:

• Rent or mortgage payments
• Operating expenses (also called selling, general and administrative expenses or SG&A)
• Utility bills
• Insurance premiums

Unfortunately, it might not be possible to predict accurately how much your fixed costs will change in a year due to variables such as inflation, property, and interest rates. It’s best to slightly overestimate fixed costs just in case you need to account for these potential fluctuations.

Find Your Break-Even Point

The break-even point (BEP) is the number at which a business has the same expenses as its revenue. In other words, it occurs when your operations generate enough revenue to cover all of your business’s costs and expenses. The BEP will differ depending on the type of business, market conditions, and other factors.

To find this number, you need to determine two things: your fixed costs and variable costs. Once you have these figures, you can find your BEP using this formula:

Break-even point = fixed expenses ➗ 1 – (variable expenses ➗ sales)

The BEP is an essential consideration for any projection because it is the point at which total revenue from a project equals total cost. This makes it the point of either profit or loss.

Plan for the Unexpected

It is necessary to have the proper financial safeguards in place to prepare for any unanticipated costs. A sudden vehicle repair, a leaky roof, or broken equipment can quickly derail your budget if you aren't prepared. Cash management is a financial management plan that ensures a business has enough cash on hand to maintain operations and meet short-term obligations.

To maintain cash reserves, you can apply for overdraft protection or an overdraft line of credit. Overdraft protection can be set up by a bank or credit card business and provides short-term loans if the account balance falls below zero. On the other hand, a line of credit is an agreement with a lending institution in which they provide you with an unsecured loan at any time until your balance reaches zero again.

How do you make financial projections for startups?

Financial projections for startups can be hard to complete. Historical financial data may not be available. Find someone with financial projections experience to give insight on risks and outcomes.

Consider business forecasting, too, which incorporates assumptions about the exponential growth of your business.

Startups can also benefit from using EBITDA to get a better look at potential cash flow.

What are the benefits associated with forecasting business finances?

Forecasting can be beneficial for businesses in many ways, including:

• Providing better understanding of your business cash flow
• Easing the process of planning and budgeting for the future based on income
• Improving decision-making
• Providing valuable insight into what's in their future
• Making decisions on how to best allocate resources for success

How many years should your financial forecast be?

Your financial forecast should either be projected over a specific time period or projected into perpetuity. There are various methods for determining how long a financial forecasting projection should go out, but many businesses use one to five years as a standard timeframe.

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Free Financial Projection and Forecasting Templates

By Andy Marker | January 3, 2024

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We’ve collected the top free financial projection and forecasting templates. These templates enable business owners, CFOs, accountants, and financial analysts to plan future growth, manage cash flow, attract investors, and make informed decisions.  On this page, you'll find many helpful, free, customizable financial projection and forecasting templates, including a  1 2-month financial projection template , a  startup financial projection template , a  3-year financial projection template , and a  small business financial forecast template , among others. You’ll also find details on the  elements in a financial projection template ,  types of financial projection and forecasting templates , and  related financial templates .

Simple Financial Projection Template

Download a Sample Simple Financial Projection Template for 

Excel | Google Sheets  

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Excel | Google Sheets    

Small business owners and new entrepreneurs are the ideal users for this simple financial projection template. Just input your expected revenues and expenses. This template stands out due to its ease of use and focus on basic, straightforward financial planning, making it perfect for small-scale or early-stage businesses. Available with or without sample text, this tool offers clear financial oversight, better budget management, and informed decision-making regarding future business growth. 

Looking for help with your business plan? Check out these  free financial templates for a business plan to streamline the process of organizing your business's financial information and presenting it effectively to stakeholders.

Financial Forecast Template

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This template is perfect for businesses that require a detailed and all-encompassing forecast. Users can input various financial data, such as projected revenues, costs, and market trends, to generate a complete financial outlook. Available with or without example text, this template gives you a deeper understanding of your business's financial trajectory, aiding in strategic decision-making and long-term financial stability. 

These  free cash-flow forecast templates help you predict your business’s future cash inflows and outflows, allowing you to manage liquidity and optimize financial planning.

12-Month Financial Projection Template

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Use this 12-month financial projection template for better cash-flow management, more accurate budgeting, and enhanced readiness for short-term financial challenges and opportunities. Input estimated monthly revenues and expenses, tracking financial performance over the course of a year. Available with or without sample text, this template is ideal for business owners who need to focus on short-term financial planning. This tool allows you to respond quickly to market shifts and plan effectively for the business's crucial first year. 

Download  free sales forecasting templates to help your business predict future sales, enabling better inventory management, resource planning, and decision-making.

Startup Financial Projection Template

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This dynamic startup financial projection template is ideal for startup founders and entrepreneurs, as it's designed specifically for the unique needs of startups. Available with or without example text, this template focuses on clearly outlining a startup's initial financial trajectory, an essential component for attracting investors. Users can input projected revenues, startup costs, and funding sources to create a comprehensive financial forecast.

3-Year Financial Projection Template

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This three-year financial projection template is particularly useful for business strategists and financial planners who are looking for a medium-term financial planning tool. Input data such as projected revenues, expenses, and growth rates for the next three years. Available with or without sample text, this template lets you anticipate financial challenges and opportunities in the medium term, aiding in strategic decision-making and ensuring sustained business growth.

5-Year Financial Forecasting Template

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CFOs and long-term business planners can use this five-year financial forecasting template to get a clear, long-range financial vision. Available with or without example text, this template allows you to plan strategically and invest wisely, preparing your business for future market developments and opportunities. This unique tool offers an extensive outlook for your business’s financial strategy. Simply input detailed financial data spanning five years, including revenue projections, investment plans, and expected market growth. Visually engaging bar charts of key metrics help turn data into engaging narratives.

Small Business Financial Forecast Template

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Download a Blank Small Business Financial Forecast Template for 

Excel | Google Sheets 

The small business financial forecast template is tailored specifically for the scale and specific requirements of small enterprises. Business owners and financial managers can simply input data such as projected sales or expenses. Available with or without sample text, this tool offers the ability to do the following: envision straightforward financial planning; anticipate future financial needs and challenges; make informed decisions; and steer the business toward steady growth.

Elements in a Financial Projection Template

The elements in a financial projection template include future sales, costs, profits, and cash flow. This template illustrates expected receivables, payables, and break-even dates. This tool helps you plan for your business's financial future and growth.   

Here are the standard elements in a financial projection template:   

• Revenue Projection: This estimates future income from various sources over a specific period.
• Expense Forecast: This predicts future costs, including both fixed and variable expenses.
• Profit and Loss Forecast:  This projects the profit or loss by subtracting projected expenses from projected revenues.
• Cash-Flow Projection: This assesses the inflows and outflows of cash, indicating liquidity over time.
• Balance Sheet Projection: This predicts the future financial position, showing assets, liabilities, and equity.
• Break-Even Analysis: This calculates the point at which total revenues equal total costs.
• Capital Expenditure Forecast: This estimates future spending on fixed assets such as equipment or property.
• Debt Repayment Plan: This outlines the schedule for paying back any borrowed funds.
• Sales Forecast:  This predicts future sales volume, often broken down by product or service.
• Gross Margin Analysis:  This looks at the difference between revenue and cost of goods sold.

Types of Financial Projection and Forecasting Templates

There are many types of financial projection and forecasting templates: basic templates for small businesses; detailed ones for big companies; special ones for startup businesses; and others. There are also sales forecasts, cash-flow estimates, and profit and loss projections. 

In addition, financial projection and forecasting templates include long-term planning templates, break-even analyses, budget forecasts, and templates made for specific industries such as retail or manufacturing. 

Each template serves different financial planning needs. Determine which one best suits your requirements based on the scale of your business, the complexity of its financial structure, and the specific department that you want to analyze.

Here's a list of the top types of financial projection and forecasting templates:  

• Basic Financial Projection Template: Ideal for small businesses or startups, this template provides a straightforward approach to forecasting revenue, expenses, and cash flow.
• Detailed Financial Projection Template: Best for larger businesses or those with complex financial structures, this template offers in-depth projections, including balance sheets, income statements, and cash-flow statements.
• Startup Financial Projection Template: Tailored for startups, this template focuses on funding requirements and early-stage revenue forecasts, both crucial for attracting investors and planning initial operations. 
• Sales Forecasting Template:  Used by sales and marketing teams to predict future sales, this template helps you set targets and plan marketing strategies. 
• Cash-Flow Forecast Template: Essential for financial managers who need to monitor the liquidity of the business, this template projects cash inflows and outflows over a period. 
• Profit and Loss Forecast Template (P&L):  Useful for business owners and financial officers who need to anticipate profit margins, this template enables you to forecast revenues and expenses.  
• Three-Year / Five-Year Financial Projection Template: Suitable for long-term business planning, these templates provide a broader view of your company’s financial future, improving your development strategy and investor presentations. 
• Break-Even Analysis Template:  Used by business strategists and financial analysts, this template helps you determine when your business will become profitable. 
• Budget Forecasting Template:  Designed for budget managers, this template uses historical financial data to help you plan your future spending. 
• Sector-Specific Financial Projection Template:  Designed for specific industries (such as retail or manufacturing), these templates take into account industry-specific factors and benchmarks.

Related Financial Templates

Check out this list of free financial templates related to financial projections and forecasting. You'll find templates for budgeting, tracking profits and losses, planning your finances, and more. These tools help keep your company’s money matters organized and clear.

Free Project Budget Templates

Use one of these  project budget templates to maintain control over project finances, ensuring costs stay aligned with the allocated budget and improving overall financial management.

Free Monthly Budget Templates

Use one of these  monthly budget templates to effectively track and manage your business’s income and expenses, helping you plan financially and save money.

Free Expense Report Templates

Use one of these  expense report templates to systematically track and document all business-related expenditures, ensuring accurate reimbursement and efficient financial record-keeping.

Free Balance Sheet Templates

Use one of these  balance sheet templates to summarize your company's financial position at a given time.

Free Cash-Flow Forecast Templates

Use one of these  cash-flow forecast templates to predict future cash inflows and outflows, helping you manage liquidity and make informed financial decisions.

Free Cash-Flow Statement Templates

Use one of these  cash-flow statement templates to track the movement of cash in and out of your business, so you can assess your company’s level of liquidity and financial stability.

Free Discounted Cash-Flow (DCF) Templates

Use one of these  discounted cash-flow (DCF) templates to evaluate the profitability of investments or projects by calculating their present value based on future cash flows.

Free Financial Dashboard Templates

Use one of these  financial dashboard templates to get an at-a-glance view of key financial metrics, so you can make decisions quickly and manage finances effectively.

Related Customer Stories

Free financial planning templates.

Use one of these  financial planning templates to strategically organize and forecast future finances, helping you set realistic financial goals and ensure long-term business growth.

Free Profit and Loss (P&L) Templates

Use one of these  profit and loss (P&L) templates to systematically track income and expenses, giving you a clear picture of your company's profitability over a specific period.

Free Billing and Invoice Templates

Use one of these  billing and invoice templates to streamline the invoicing process and ensure that you bill clients accurately and professionally for services or products.

Plan and Manage Your Company’s Financial Future with Financial Projection and Forecasting Templates from Smartsheet

Empower your people to go above and beyond with a flexible platform designed to match the needs of your team — and adapt as those needs change. 

The Smartsheet platform makes it easy to plan, capture, manage, and report on work from anywhere, helping your team be more effective and get more done. Report on key metrics and get real-time visibility into work as it happens with roll-up reports, dashboards, and automated workflows built to keep your team connected and informed. 

When teams have clarity into the work getting done, there’s no telling how much more they can accomplish in the same amount of time.  Try Smartsheet for free, today.

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Financial Forecasting: How to Do It with Different Methods, Models, & Software

Published: June 07, 2023

Planning for your company's future is significantly easier and more effective when you have a picture of what that future might look like. That's why any business interested in sound financial planning needs to have a grip on financial forecasting — the process of making accurate projections that can frame thoughtful, productive financial decisions in real time.

Here, we'll explore the concept of financial forecasting in depth, review some popular financial forecasting models, go over some prominent financial forecasting methods, and see some of the best financial forecasting software solutions on the market.

1. What is financial forecasting?

Forecasting vs. Budgeting

2. Financial Forecasting Models

• Top-Down Financial Forecasting
• Delphi Financial Forecasting
• Statistical Forecasting
• Bottom-Up Financial Forecasting

3. Financial Forecasting Methods

• Straight Line
• Simple Linear Regression
• Multiple Linear Regression
• Moving Average

4. How to do Financial Forecasting

5. Financial Forecasting Software

What is financial forecasting?

Financial forecasting is a process where a business leverages its current and past financial information to project its future financial performance. Forecasts are typically applied to assist with budgeting, financial modeling, and other key financial planning activities.

Financial forecasting is often conflated with the other key financial planning processes it generally informs — namely, budgeting. Though the two activities are often closely linked, it's important to differentiate between them.

The difference between a financial forecast and a budget boils down to the distinction between expectations and goals. A forecast details what a business can realistically expect to achieve over a given period.

When done correctly, it represents a reasonable estimate of how a company will likely perform — based on current and historical financial data, broader economic trends, foreseeable factors that might impact performance, and other variables that can be viably accounted for.

A budget, on the other hand, is the byproduct of a financial analysis rooted in what a business would like to  achieve. It's typically updated once per year and is ultimately compared to the actual results a business sees to gauge the company's overall performance.

Now that we have a picture of what financial forecasting is, let's take a look at some of its most popular models.

Financial Forecasting Models

1. top-down financial forecasting.

Top-down forecasting is a financial forecasting model where a company starts by analyzing broader market data and ultimately whittles down company-specific revenue projections from there.

It's one of the more simple, straightforward forecasting models — essentially amounting to a company looking at its total market size and calculating potential revenue based on its assumed market share with the help of  fp&a software  to collect all the data you need.

Top-Down Financial Forecasting Example

Let's say a company occupies space in a market that generates an estimated $1,000,000,000 in revenue annually. If the business assumes it will have a market share of 2.5%, a top-down forecast would suggest that it will see $25,000,000 in revenue in the coming year.

Benefits of Top-Down Forecasting

• It provides a more streamlined approach for larger, established businesses with diverse revenue sources than a concentrated, product-level forecast.
• It's often the only viable forecasting avenue for early-stage companies without extensive financial data.

Drawbacks of Top-Down Forecasting

• It's often seen as hastier and more superficial than more granular forecasting methods.
• A top-down forecast is generally seen more as a starting point than a concrete projection.

2. Delphi Forecasting

The term "Delphi" here is a reference to the ancient Greek city where the Greeks consulted the mythical oracle Pythia . Fittingly, the Delphi forecasting method involves financial forecasters consulting experts for their takes on projections.

With this method, a business sends multiple rounds of questionnaires to a panel of experts, covering the company's financial data. With each new round, the experts see an aggregated summary of the previous round and adjust their perspectives accordingly. Ultimately, the hope is that a few rounds can produce a consensus among the experts that can be applied to the company's financial projections.

Delphi Financial Forecasting Example

If a company were to leverage the Delphi model, it would gather a diverse array of experts and send them questionnaires without any of them ever meeting face-to-face. After one round, the experts would each receive a summary, detailing what the other experts thought with respect to the business's potential financial performance.

The experts would be at least partially moved by the group response and submit a new questionnaire accordingly. The panel would continue to receive questionnaires until it arrived at a consensus, and the forecast would be based on that insight.

Benefits of Delphi Forecasting

• It tends to be more objective than conventional, in-house forecasting.
• Contributions are anonymous, so respondents can answer candidly.

Drawbacks of Delphi Forecasting

• The method doesn't allow for a productive, open dialogue like a face-to-face meeting would.
• Response times can be long or unpredictable, prolonging forecast delivery.

3. Statistical Forecasting

Statistical forecasting is a broad term that accounts for a variety of forecasting methods. At its core, the model is exactly what it sounds like — forecasting based on statistics. More specifically, the term is essentially a catch-all that covers forecasting rooted in the use of statistics derived from historical, quantitative data.

Statistical Financial Forecasting Example

One method that generally falls under the statistical financial forecasting umbrella is the moving average method listed below. A company might look at the revenue it generated over the past 100 days and apply that statistic to its potential performance over the next similar period.

Benefits of Statistical Forecasting

• It rests on a more solid basis than other methods.
• It can be more straightforward than other methods — provided you have the right data.

Drawbacks of Statistical Forecasting

• Certain methods that fall under this umbrella can provide relatively hasty estimates, relative to other models.
• Companies without extensive historical data might not be able to produce reliable statistical forecasts.

4. Bottom-Up Financial Forecasting

As you can probably assume, bottom-up financial forecasting is essentially the opposite of top-down forecasting — it's a model where a company starts by referencing its detailed, ground-level customer or product information and works its way up to a broader revenue projection.

Bottom-Up Financial Forecasting Example

A bottom-up financial forecast could start with a business taking a look at its sales volume — or the total number of units of its product it moved in a given period — from the previous year. Then, it would estimate the price it expects to charge for that product in the coming year. From there, it would calculate its projected revenue by multiplying the two figures.

Obviously, that example is unrealistically straightforward. In most cases, the business in question here would consider other lower-level variables as well — potentially including customer-related information like total customers or retention rate.

Benefits of Bottom-Up Forecasting

• The model allows for more detailed analysis than most others.
• It offers more room for input from various departments.

Drawbacks of Bottom-Up Forecasting

• Any errors made at the micro-level can be amplified to the macro-level with this model.
• A thorough bottom-up forecast can be time-consuming and particularly labor-intensive.

Financial Forecasting Methods

1. Straight Line

True to its name, straight line forecasting is probably the most straightforward financial forecasting method businesses can leverage. It's rooted in basic math and tends to provide rougher projections than the other, more sophisticated methods listed here.

With straight line forecasting, a business gathers rough growth estimates — typically pulled from past figures — and applies them to coming months, quarters, or years. It's generally employed when a company assumes it will see steady growth over a given period.

For instance, if your business has seen revenue reliably grow 5% year over year for the past four years, you might use that figure to guide your straight line forecasting and assume that level of growth will continue for the next few years.

2. Simple Linear Regression

The simple linear regression is a common financial forecasting method where a business explores the relationship between two variables — one independent and one dependent. For instance, a company could use this method to forecast revenue by gauging how it might be impacted by shifts in GDP.

3. Multiple Linear Regression

Simple linear regression analysis often isn't enough to make accurate financial projections, as financial performance is rarely a function of a single factor. The nature of the multiple linear regression is covered by its name — instead of trying to predict how financial performance will play out in response to a single variable, the model considers two or more independent factors.

4. Moving Average

Moving average forecasting is a method most commonly used to identify the trend-direction of a stock, but businesses can still leverage it to project their financial performance. It involves taking the arithmetic mean of a dataset from a past period and applying that average to future projections. The method is typically used to evaluate potential performance over shorter periods — like weeks, months, or quarters.

How to do Financial Forecasting

1. Define your purpose for using a financial forecast.

To get the most out of a financial forecast, you have to know why you're using it in the first place. Ask yourself questions such as:

• What are you hoping to learn and take away from its results?
• Are you trying to get a better gauge of the company budget?
• Are you trying to reach a certain goal or threshold for product sales?

When you have clear intent behind your financial forecast, you'll have a more concise and clear result to search for once you begin.

2. Gather historical data.

To track the progress of your financial forecast, you have to have a good idea of your current and past finances. Take the time to analyze your historical financial data and records, including:

• Revenue and losses
• Equity and liabilities
• Fixed costs
• Investments
• Earnings per share

Your forecast will only be as accurate as the information you collect, so get as much relevant data as possible for better results and understanding.

3. Set a time frame for your forecast.

Decide how far into the future you're committed to recording and documenting your business' financial performance. This can look like weeks, months, quarters, or even years of data collection. 

It's most common for a business to conduct a forecast over the course of a fiscal year, but it's unique for every business. And if you need to adjust your forecast as time goes by, or if your goals change, you're ultimately in control and can make adjustments if need be.

4. Choose a forecasting method.

We've already give you four financial forecasting methods, so when choosing the one for your business, make sure it aligns with your previously declared purpose and goals.

5. Monitor and analyze your forecast results.

As your financial forecast delivers new data, you should monitor and analyze it differently. When you get enough data, try to think about how you can use it:

• Identify potential issues: Monitoring and analyzing financial results can help a business identify potential issues before they become more significant problems. For example, if expenses are higher than anticipated, a business can identify the cause and take corrective action to prevent it from negatively impacting financial performance.
• Measure progress towards goals: A financial forecast provides a business with financial goals and expectations. Weighing financial results against these goals enables a business to measure its progress toward achieving them. This can help the business identify where it is falling short and adjust to get back on track.
• Manage cash flow: Monitoring and analyzing financial results can give a business insights into its cash flow situation. By understanding how much cash is coming in and going out, a business can make smarter decisions about budgeting and spending.

And it doesn't have to be a tedious task to analyze your financial data, thankfully there's plenty of forecasting, decision-making and financial-planning tools available for this purpose. Let's go through some of our favorites.

Financial Forecasting Software

1. sage intacct, pricing: contact for pricing.

Sage Intacct is a multifaceted accounting and financial planning software with an accessible interface and a suite of features that can streamline your financial forecasting time by over 50%. The platform's automated forecasting resources effectively eliminate the stress, legwork, and room for error that often come with financial planning via spreadsheets.

Best for Collaboration

Sage Intacct separates itself from similar applications through its accessibility and room for collaboration. The software is particularly user-friendly and offers a singular, centralized solution for virtually any stakeholder within an organization to easily contribute to and make sense of financial projections.

2. PlanGuru

Pricing: plans starting at $99 per month.

PlanGuru is a dedicated financial forecasting software — supporting 20 separate forecasting methods that can cover projections of up to 10 years. The program also allows you to incorporate non-financial data into your forecasts and has scenario analysis features to help you interpret the ramifications of potentially impactful events. PlanGuru also offers a range of plans to suit most SMBs' budgets.

Best for Pure Financial Forecasting

Some of the other resources listed here are multifaceted accounting solutions that happen to cover financial forecasting — not PlanGuru. This application is primarily dedicated to creating financial projections.

As I mentioned, it offers 20 unique financial forecasting methods to support more effective strategic planning — along with a host of other features tailored to help you gauge your future financial performance. If you're interested in a cost-effective, forecasting-specific platform, look into PlanGuru.

3. Workday Adaptive Planning

Workday Adaptive Planning provides financial forecasting resources that reconcile accessibility with powerful functionality. The software lets you leverage both real-time financial and operational data to create and compare multiple accurate, effective what-if scenario models. It also allows you to forecast across any time horizon — whether it be daily, monthly, quarterly, or long-term.

Best for a Dynamic Range of Forecasting Options

Workday Adaptive Planning's ability to support detailed bottom-up and top-down forecasts makes it a particularly attractive option for businesses of virtually any size. It allows you to create compelling forecasts based on targets from executive guidance or ground-level operational plans.

That dynamic range of forecasting options helps set the program apart from similar options. If you're interested in software that lets you forecast from various perspectives without sacrificing accuracy or effectiveness, look into Workday Adaptive Planning.

4. Limelight

Limelight is an integrated, web-based financial planning that provides businesses with a centralized solution for almost all of their forecasting needs. Designed primarily to suit finance and accounting teams, the software offers powerful general automation and automated data integration to streamline and simplify forecasting without losing out on quality.

Best for a Familiar, Excel-Esque UX

Limelight's user experience is designed to reflect Excel — making it a familiar, particularly easy option for CFOs, controllers, budget managers, and other users to adapt to. If you're interested in a powerful forecasting resource with that kind of accessibility, Limelight might be your best option.

It's never too late to run a financial forecast.

Forecasting is a central component of sound, productive financial planning. If you have no idea what to expect financially, you'll have a hard time preparing for obstacles, setting attainable goals, and identifying aspects of your business that should be of particular interest. No matter the scale or nature of your organization, having a pulse on your financial future is always in your best interest.

Editor's note: This article was originally published in June 2022 and has been updated for comprehensiveness.

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How to create a financial forecast for a new business

Table of Contents

What are financial forecasts?

Why are financial forecasts important, measuring success , attracting investors, how can i create a financial forecast for my new business, creating forecasts by researching competitors , creating forecasts by researching your target market.

Running a business requires you to plan ahead frequently. If you don’t and there are unexpected expenses or losses in your future, your business may end up suffering. In order to prevent these kinds of setbacks, business owners create financial forecasts.

This article will provide you with a few ideas on how to make financial forecasts for your business. We’ll cover a few topics, including:

• How can Countingup help me create financial forecasts?

Financial forecasts are basically a prediction of what will happen to your business finances in the future. Most established businesses create them using historical data: the financial events of the previous month provide a rough outline of what to expect, then they adjust the new forecast to account for any events specific to the upcoming month.

This article will focus on creating a financial forecast as a new business, which means you may not have historical financial records available. Fortunately, there are other methods of creating a financial forecast for new businesses.

An important point to remember is the difference between a forecast and a budget . In business, a budget is a document that shows how you would like your company finances to look in the long term. Most companies make them annually, and they cover every aspect of the company’s finances. They should also act more as a goal or an ideal, rather than an actual prediction.

Forecasts, on the other hand, more accurately reflect what’s happening with your business. They cover a shorter period of time and focus on a particular part of your accounts, like sales or cash flow . While a budget can guide the overall direction of your business, you can use forecasts to make more specific and urgent decisions. 

Financial forecasts are vital for a business to measure its success . Although a forecast should be realistic rather than show the perfect financial future for your business, selling much less and spending much more than your forecast indicated means something is going wrong within your company. Always compare your financial forecasts with your actual financial data to ensure your business is improving rather than struggling.

Having a few different high-quality financial forecasts as part of your business plan is an excellent way to attract investors to your business . Accurate forecasts indicate to potential investors that you have a good idea of what the future holds for your company, which will make them more confident when investing.

Of course, people are only likely to invest in your company if the forecasts also show that you’ll be successful, but showing the positive impact their investment could have might persuade them to put money into your business idea.

Researching your competitors is a key part of writing your business plan , but this research is also very valuable for creating forecasts. For example, if your research can dig up competitors’ sales figures or expenses, it will provide a good outline for how your sales and expenses might look, so you can use this as a starting point for making forecasts.

This method is particularly useful if your competitors are registered as limited companies , as these businesses must make their accounts publicly available. Simply find your competition on the government website Companies House , and you can examine their financial data in detail.

Please note that if your competitors are mostly sole traders, this method will be far more difficult to use, as their accounts will not be publicly available. 

Another key subject for research when you’re starting your business is your target market . A target market is a group that a particular product has the potential to be popular with, so most businesses focus a lot of marketing on attracting their target market. 

With enough research, you can find out how many people in your local area are part of your target market and how much of your product your target market is likely to buy. Once you have this information, you can start making all sorts of financial forecasts.

For example, you can create a sales forecast if you know how large your target market is, as this will give you an idea of how many people will be interested in buying your product. Then, using your sales forecast, you can start checking how much the amount of inventory you’ll need will cost. Once you have this price, you can also create an expense forecast. 

Both these methods are very helpful to new businesses that have no historical financial data. Remember that forecasts based on historical data can be much more accurate, though, so incorporate that data into your forecasts after a couple of months. 

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Financial Plan vs. Financial Forecast: What's the Difference?

J.B. Maverick is an active trader, commodity futures broker, and stock market analyst 17+ years of experience, in addition to 10+ years of experience as a finance writer and book editor.

Financial Plans vs. Financial Forecasts: An Overview

A financial forecast is an estimation, or projection, of likely future income or revenue and expenses, while a financial plan lays out the necessary steps to generate future income and cover future expenses. Alternatively, a financial plan can be looked at as what an individual or company plans to do with income or revenue received.

While both processes orient financial activity toward the future, a financial plan is a road-map drafted now that can be followed over time and a financial forecast is a projection or estimate of future outcomes predicted today.

Key Takeaways

• A financial plan is a strategic approach to finances that marks out a road-map to follow into the future.
• A financial forecast is an estimate of future outcomes arrived at using one of several methods, including statistical models to make projections.
• Both businesses and individuals can make use of financial plans and financial forecasts.

Financial Plans

A financial plan is a process a company lays out, typically broken down into a step-by-step format, for utilizing its available capital and other assets to meet its goals for growth or profit based on a reasonable financial forecast. A financial plan can be considered synonymous with a business plan in that it lays out what a company plans to do in terms of putting resources to work to generate maximum possible revenues.

Individuals can also take advantage of a financial plan. An annual financial plan is a guidebook of sorts that tells you where you’re at financially right now, what your goals are looking ahead and what areas or issues need to be addressed so that you can meet those goals. The plan covers every aspect of your financial life, from  investing  to  taxes  to your outlook for  retirement . While your starting point in developing your plan may be different based on your age, income, debts, and  assets , the most important components of an annual financial plan are the same.

Financial Forecasts

Financial forecasting is critical for business success. To effectively manage working capital and cash flow , a company must have a reasonable idea of how much revenue it plans to receive over a given time period and what its necessary expenses will be over that same period of time. Financial forecasts are commonly reviewed and revised annually as new information regarding assets and costs becomes available. The new data enables an individual or business to make more accurate financial projections. It is easier for established companies that generate steady revenues to make accurate financial forecasts than it is for new businesses or companies whose revenue is subject to significant seasonal or cyclical fluctuations.

For an individual, a financial forecast is an estimate of his income and expenses over a period of time. Based on that forecast, the individual can then construct a financial plan that includes saving, investing, or planning for obtaining additional income to augment his personal finances—as well as anticipating expenditures that would deplete them.

U.S. Small Business Administration. " Write Your Business Plan ."

PennState Extension. " Developing a Business Plan ."

Harvard Business School. " 7 Financial Forecasting Methods to Predict Business Performance ."

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Client management

Predicting business expenses: How to forecast accounts payable

“Entrepreneurs believe that profit is what matters most in a new enterprise. But profit is secondary. Cash flow matters most.”  ~Peter Drucker, management consultant, educator, and a leading voice in modern project management theory

No matter what type of business you run, you can’t do it successfully without having a handle on your cash flow.

At least not for very long.

One of the troublesome parts of dealing with balance sheets and working capital is that expenses are unpredictable, especially if your organization is in a growth phase. Your day-to-day expenses don’t occur evenly, and even if they did, bills don’t come in or come due at even increments. 

Not to mention, you’re facing the same issue on the other end, with clients that pay with varying degrees of timeliness.

Accounts payable forecasting is the practice of predicting at least one side of that equation: the money you’ll owe in the coming months. 

Here’s what you need to know about getting started with forecasting accounts payable.

What are accounts payable?  

Accounts payable (AP) is a term for all the money a company owes to others for goods and services the company has already received. These are debts that must be repaid relatively quickly, usually within 90 days. Bills from vendors, freelancers, and suppliers are all part of AP.

Businesses use AP to understand their expenses (specifically what money is already promised to go out the door) more clearly, enhancing decision-making and financial planning. It’s an oversimplification to say, “you can’t spend money you don’t have.” But at some level, it’s true — spend money you owe vendors on your own office renovation, and you’ll find yourself in an uncomfortable position.

Think of AP like a more complex version of a personal credit card. Each month you receive a statement showing how much you owe and a due date that tells you when to pay to avoid penalties (interest and fees).

With AP, the challenge is that no one else is collecting the “credit card charges” — your business has to do that on its own. As an added layer of complexity, you’ll often have to deal with varying due dates, too.

Just like keeping on top of your credit card payments helps your overall financial health and keeps you from getting into financial hot water, accurately tracking your agency’s AP is essential for managing cash flow, avoiding disruptions, and maintaining vendor relationships.

• The basics of forecasting

Accounts payable forecasting is a financial planning process that predicts and plans for near-term expenses. This financial modeling tool measures your current liabilities and paints a part of the picture of your future cash flows.

It’s similar to budgeting for future needs at home. For example, if you know your car needs new tires, you can plan for the expense by making budget adjustments for a couple of months prior. If you wait until you get in an accident because your worn-out tire blows out on the interstate, your expenses will be much higher — and unplanned.

AP forecasting is the business equivalent of planning for that tire replacement (and the rest of your month-to-month and one-time expenses). 

To forecast project expenses well, a business needs linear, scheduled, and repeatable processes. Include at least the following steps in your process:

Collect historical data

Most business expenses are cyclical. Even if they don’t come due every month, they aren’t completely random. For example, you might not know exactly when you’ll need to pull in a specialist freelancer, but you already have a pretty good idea that you’ll do so three or four times in the coming year.

If you’re collecting and using historical data, that is.

Some AP forecasting trends might not be front of mind and might not show up in consistent or identical patterns, but they’re still predictable if you look more closely at historical data.

Where do you get this data? If your organization uses accounting software or works with an external accounting partner, that’s a great place to start! If you’re tracking AP and accounts receivable (AR) in another location or document, dive into the data there.

Analyze spending patterns

Take a closer look at your current spending patterns. If you aren’t categorizing expenses, it’s wise to start doing so.

Refer back to that specialist freelancer. Maybe you use quite a few of them for various specialties or verticals, and it’s a little daunting to pull individual invoices and receipts. If you’re categorizing those expenses properly, you’ll be able to quickly isolate all freelancer expenses. 

Take Google Ads as another example. Some businesses buy these for their customers, but it’s not a real “expense” in the sense the customer pays for them as part of their broader contract. Being able to quickly identify all such expenses via categorization helps maintain clear thinking about expenses and income. 

Consider external factors

Does the industry you serve experience heavy seasonality? If so, your clients may pay a flat monthly rate while your actual expenses ebb and flow with their seasonality. Market conditions can also factor into cash flow forecasting: inflation, changes in an industry, and so on.

Implement a review process

Don’t assume your AP forecasting process is perfect. (Because it will never be perfect!)

Make sure to create and implement a review process that evaluates your AP forecasting against actual AP. Where it’s not lining up, identify what adjustments you need to make to your formulas. 

One more note: A conservative estimate is better than a hopeful one. AP and AR forecasting shouldn’t be what you’re hoping to be paid and what you’re hoping to owe. Instead, use a conservative, realistic estimate of what is most likely to happen.

• Accounts payable vs. accounts receivable: What’s the difference?

Businesses rarely track AP alone. They track it alongside accounts receivable (AR), which is the amount of money that others owe to the company. AP is your outflows, money that will be going out . AR is money that will be coming in (inflow).

Both of these elements (among many others, like current assets, liabilities, and liquidity) will be included in an organization’s financial statements. Keep the two terms straight by remembering this:

P/Pay/Payable = Bills to pay

R/Receive/Receivable = Money you’ll receive

Let’s examine these concepts in more detail.

Accounts payable

Accounts payable refers to any outstanding bills for goods or services already delivered that will be due in the near term. It’s money you’ve already committed to spend, which is why businesses use accounts payable as they forecast resource costs .

Accounts receivable

Accounts receivable refers to any outstanding source of income for goods or services you’ve already delivered to others (such as invoices that you’ve sent to clients for completed work, but that clients haven’t paid yet). It’s money your customers or clients have already committed to pay you, but hasn’t hit your bank account yet.

• Accounts payable formulas

There are already several established accounts payable formulas out there. Businesses use one or more of them to forecast AP. Which one is right for you depends on the types of clients you serve and the specifics of your financial situation.

Historical trend analysis

The formula for historical trend analysis looks like this:

Current amount - base/previous amount = change in amount

To turn that into a percentage, divide the answer by the base year/previous amount.

Using this formula, you can track changes over time, either by percentage or in real numbers. You might use this to compare AP and AR over time to project future trajectory or identify past seasonality.

Regression analysis

Regression analysis compares a dependent variable and an independent one and can be used in AP forecasting to identify what a specific change is likely to do to another aspect of the business.

A simple linear regression looks like this:

Y = a + bX + ϵ

And a typical regression analysis extends out to this:

Y = a + bX + cX + dX + ϵ

(Courtesy of the Corporate Finance Institute )

Cash conversion cycles (CCC)

CCC is calculated by adding days inventory outstanding (DIO) and days sales outstanding (DSO), then subtracting days payable outstanding (DPO). In a formula:

CCC = DIO + DSO - DPO

This formula measures how long it takes for goods (or services) to turn into income, minus how long it takes you to pay your AP. A low figure is usually considered healthy, and if your CCC score starts to rise, it’s wise to investigate why.

Of course, it requires knowing how to calculate the average number of days in your DPO, DSO, and DIO metrics. Here’s a detailed guide.

Simple moving average

The formula for simple moving average (SMA) looks like this:

This formula averages every instance of a figure over a fixed set of periods, such as a 50-day moving average, showing what the average price is during that stretch. It’s useful for comparing volatile figures over time, such as if your AP or payment patterns are spiky, you could measure this element in a three- or four-month rolling average.

Vendor payment policies (2/10 and Net 30)

2/10 Net 30 is a popular policy where payers get a 2% discount if they pay an invoice within 10 days but otherwise have up to 30 days to pay without penalty. Here’s the formula for the 2/10 part of the policy:

x - .02x = y

Where x is the agreed-upon price and y is the discounted price for early payment (within 10 days).

• Best practices for accurate forecasting

Accounts payable forecasting isn’t easy, and it will never be precise. But when you follow best practices for accurate forecasting, you’ll have a much easier time with resource management and understanding your cash flow.

1. Mine historical data

Your historical data should be a gold mine for forecasting, especially once you have data both on what happened (actual) and on your forecasts for that period. (This is one reason to start forecasting today, not next quarter!) 

Look back at periods with sudden expenses. How well did you forecast them? Did your model withstand the spike, or did it punch right through your predictions?

Where you see large variances, look for the “why,” which will often point to what you need to change for next time.

2. Identify patterns

Many unexpected or sudden expenses don’t actually need to be unexpected or sudden.

They’re things that you can plan for. You might not know when you’ll need a new laptop, but you know it will happen sometime between now and the turn of the decade. 

Look at those “sudden” expenses in your historical data and see how many of them were predictable or falling into a pattern. Then, incorporate those elements into your forecasting.

3. Understand the ramifications

Not all late payment penalties are the same. But some will cost you financially. Others will cost you reputationally. As you continue honing your forecasting, start identifying these elements as well, especially if money is tight. Should you need to delay on a line item in your AP, it’s advantageous to know which one will have the least amount of impact (whether financial, relational, or both).

Get a stronger, more robust financial forecast for your business with Teamwork.com

Consistently predicting your business expenses accurately is liberating for businesses: you can operate confidently and spend less time worrying about cash flow, freeing you up to focus on your business’s unique selling proposition and delighting your clients.

Teamwork.com is the ideal platform to run every aspect of client work. With budgeting and forecasting tools, you’ll be able to plan and budget for projects with ease and clarity.

The only all-in-one platform for client work

Trusted by 20,000 businesses and 6,000 agencies, Teamwork.com lets you easily manage, track, and customize multiple complex projects. Get started with a free 30-day trial.

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TABLE OF CONTENTS

• What are accounts payable?

Ben is a Senior Content Marketing Specialist at Teamwork.com. Having held content roles at agencies and SaaS companies for the past 8 years, Ben loves writing about the latest tech trends and work hacks in the agency space.

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Cashflow Forecasting Software

• April 8, 2024

12 Min Read

Money is at the heart of all businesses and as long as there is cash flowing in, one can safely assume that the business is in its prime financial health.

But hey you know as well as us that cash management is not a cakewalk, and definitely not a task you can undertake without proper financial software.

One needs to answer numerous questions such as,

• Do I have enough working capital to maintain operational efficiency?
• What will be the impact of certain decisions (i.e. hiring a new employee) on the cash flow?
• What’s the real-time cash situation in my business?
• When should I pay the invoices to not interrupt the cash flow?

Answering these questions is quite difficult if you don’t have a thorough understanding of how cash flows in your business.

Well, this article offers a list of the 10 best cash flow forecasting software in the market and one of these software will definitely help you answer those questions.

So let’s dive right in.

What is Cash Flow forecasting software?

Cash flow forecasting software is a financial tool used to predict the inflow and outflow of cash in a business. It helps businesses manage their financial resources and cash position so that they can thrive in changing circumstances.

The modern forecasting tools in the market use historical data, AI technologies, and advanced algorithms to predict the accurate state of cash in the business. Such detailed understanding is essential for businesses to make informed financial decisions.

Let’s explore the highly-rated forecasting tools in the market and find the best fit for your business.

Best Cash Flow Forecasting Software Tools

• Upmetrics – AI Financial Forecasting
• Agicap   – Automated Cash Flow Forecasting
• Abacum – Forecasting tool for mid-market companies
• Futrli – Cash flow forecasts for small businesses
• Xero – Short-term cash flow forecasting
• Float – Visual forecasting tool for strategic planning
• Brixx – Financial forecasting for startups and small businesses
• Jirav – Cash flow forecasting for financial planners and analysts
• Dryrun – Cash flow forecasts for global businesses
• Fathom   – Business planning with forecasting

1. Upmetrics

Upmetrics is a business and financial planning software that helps emerging startups and small businesses conduct business and financial planning with its range of modern intuitive tools.

Its financial forecasting calculator helps you build complex financial plans and reports from scratch without tying you up in the complexities of accounting and calculations.

However, that’s not it.

What separates Upmetrics from the leading cash forecasting software is its AI adaptation to offer accurate and precise suggestions for revenue, expenses, cost of sales, and personnel.

AI takes away the guesswork from the equation and helps you predict the state of the cash flow in the future.

Overall, Upmetrics helps in making informed business decisions, testing different financial scenarios, and evaluating the financial standing of the business with its simple and easy-to-use adaptability.

Best Features:

• Precise and Accurate AI-generated financial suggestions.
• Forecasting calculator to calculate revenue, expenses, cost-of-sales, and personnel.
• Creates a detailed financial plan from scratch.
• Supports forecasting for up to 7 years
• Generates 8 different financial reports.
• Intuitive visual dashboard summarizing your key metrics
• Easy to share and embed into your business plan.

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Agicap is an extensive cash flow management and forecasting software used to build automated forecasts for small businesses.

This tool allows you to test the viability of different financial scenarios by helping you study their impact on your future cash flows.

Moreover, it would build realistic cash flow forecasts for your business using the assumptions set by you. This will again help you predict the state of cash flow in the future.

Agicap allows the integration of financial data and makes real-time updates to the cash flow allowing you to get a realistic overview of your business.

When you choose Agicap, you can make data-driven decisions by getting a virtual representation of your daily, weekly, monthly, and quarterly forecasts.

Overall, the friendly interface and the integration with more than 150 accounting tools make Agicap a highly desirable tool.

Best Features

• Automated cash flow forecasting
• Real-time monitoring
• Scenario analysis
• Allows forecasts for multiple business units
• Customizable reports
• Displays short, mid, and long-term forecasts
• Integration with 150+ accounting software

Limitations:

• Steep learning curve to realize the true potential of this software.
• It has only annual plans and no monthly or quarterly offers.
• Agicap offers limited data visualization options.
• It lacks the depth that allows detailed KPI tracking.
• It is not suited for large-scale enterprises.

Personalized plans

Abacum is a cash flow forecasting software that seamlessly integrates with your business systems helping you get real-time insights into your cash flow.

This robust forecasting tool ensures effortless cash flow management by bringing together a business plan, marketing funnel, revenue cohort, and headcount under one head.

This tool helps you make informed decisions in real time by allowing you to create scenarios, adjust the assumptions, and measure their impact on your cash flow.

Get rid of those stale spreadsheets and model the new projections into your business metrics with Abacum. Report, analyze, and drive your business outcomes by getting real-time operational insight into your business.

Best features:

• Automated forecasts using historical data and advanced algorithms.
• Syncs operational and financial data in real time.
• Simplified and easy calculations.
• Collaborative team integration.
• Automated financial statements and visual reports.
• Integrates with major HRIS, BI, and ERP systems.

Limitations

• Abacum is not the right software for small businesses with limited cash flow and cash management needs.
• Support and learning are needed to unravel the truly advanced features of Abacum.
• Pricing plans are highly variable making it objective for many businesses.

Not available publicly.

Futrli stands out in the market as a comprehensive cash flow forecasting software that takes away the complexity of forecasting from the equation and empowers you to spend more time in decision-making.

Futrli 3-way rolling forecasts are built using 2 years of historical data and are updated daily with the new data. It makes predictive analyses about the future cash position in the business using advanced algorithms.

Using this tool, you can test different scenarios by analyzing their impact on your cash flow to make informed choices. While cash flow forecasting is its primary focus, Futrli makes reporting extremely easy, intuitive, and fast with its powerful interface.

• 3-way rolling forecasts (P&L, Balance sheet, and Cash flow)
• Daily cash flow forecasting
•  Customizable reporting and dashboard
• Allows different scenarios and what-if analysis
• Real-time financial insights
•  Detect new patterns and alert you to the changes
• 3 years of operational and cash flow forecasts
• Integrates with Xero, Sage, and Quickbooks online.
• A steep learning curve before you can unravel its best features.
• While the solution is comprehensive, it offers limited integration with different accounting software.
• Futrli is quite pricy compared to other forecasting software.

Xero analytics , a part of Xero, offers insight into the future state of your business through short-term cash flow projections.

With Xero, you can track your cash flow, forecast your bank balance, and evaluate the impact of receivables and payables on the cash flow.

This accounting tool offers a customizable snapshot of your business performance. It helps you to track the financial metrics by allowing you to set the filters and compare the trends.

You get to drill down into the details and evaluate the financial health of your business in real-time with advanced Xero plans.

•  AI-powered predictions
• Trend analysis and performance evaluation
• Basic scenario planning.
• Visual reports to summarize the business’s financial health.
• Customizable dashboard
• Automated financial reports
• Even the most advanced plans of Xero offer cash flow forecasting for up to 90 days only.
• It lacks the features to support complex cash flow management needs.
• Xero analytics limits the extent to which you can customize and adjust the scenarios in your cash forecast.
• The pricing is exceedingly high for the forecasting features it offers.

Only, the established plan supports cash flow forecasting.

Float allows you to forecast the cash position of your business by using historical data from your business systems.

This robust tool helps you model different scenarios, projects, and cash runways in your business without tangling you up in the complexities. Simply toggle between different scenarios, study their impact on the cash flow, and identify the gaps in your cash flow.

Make data-driven decisions for your business as you study the automated visual reports prepared by Xero.

This all-encompassing tool integrates easily with ERP systems like Xero, QuickBooks, and FreeAgent and is a valuable tool for businesses of all sizes.

• Scenario planning and what-if analysis
• Syncs data from the source in real-time.
• Forecasting for multiple projects.
• Updates your visual forecasts in real time.
• Easy integration of financial data.
• Custom cash thresholds to prevent cash death.
• The early plan restricts long-term forecasting.
• The features are quite standard and are easily available in an advanced accounting system.
• Compared to other forecasting software in the market, Float lacks depth in forecasting functionalities.

Brixx is a strategic decision-making tool focused on modeling the future of your business and helping you make the right financial decisions.

It offers a thorough financial forecasting solution for cash flow, budgeting, reporting, and business planning and is an extremely easy-to-use software.

Brixx helps you build the financial picture of your business by allowing you to input financial assumptions, adjust the timeline, test the what-if scenarios, and study its impact on your cash flow.

This intuitive and simple tool integrates with Xero and allows you to compare the actuals against the forecast with an interactive dashboard that simplifies everything.

This strategic tool empowers you to test new business ideas without wrapping yourself in the complexity of numbers.

• User-friendly interface for building forecasts.
• Integration with the renowned tool Xero.
• Extremely easy-to-use.
• Up to 10 years of cash flow forecast
• Interactive and enriching visual reports.
• Collaborative tool with restrictive controls.
• The capabilities of Brixx are questionable when it comes to granular-level financial modeling.
• Brixx offers limited integration opportunities making it difficult to conclude historical data.
• Limited customization options for reporting format.
• The integration with Xero does not sync in real time.

Only the professional and enterprise plans would support integration and cash flow forecasting.

Jirav is another of the best cash flow forecasting software in the market. With this comprehensive financial planning tool, you can forecast, budget, report, and analyze how the cash flows within your business.

Jirav makes it easier for businesses to build their financial blueprints and automate the process of creating budgets and operating plans. Not only that, you track KPIs and metrics that are otherwise difficult to determine and gauge the true financial health of your business.

Jirav’s extensive list of functionalities allows you to plan and prepare for multiple business outcomes and prepare precise rolling forecasts with its advanced algorithms.

It integrates easily with the leading ERP systems and is indeed a worthy tool for drilled-down business planning.

• Real-time financial forecasting.
• Automates the process of building budgets and operating plans.
• Automate historical and forecasted KPIs.
• Automated financial reporting and analysis.
•  Easy collaboration and restrictive controls.
• Workforce planning
• Requires a steep learning curve to uncover Jirav’s advanced functionalities.
• It is quite expensive compared to other cash forecasting software in the market.
• Jirav’s dashboard fails to display reporting insights on the tab.

Dryrun is a cloud-based cash flow forecasting software that helps you model the cash position of your business allowing you complete manual control.

The advanced algorithms of Dryrun generate automated forecasts for cash flow and sales while allowing you to plan for different complex and advanced scenarios.

Its auto-currency conversion allows you to make projections for different business locations in different currencies, thereby increasing the precision of your forecasts.

Dryrun integrates with all the major systems and syncs the data in real time giving you real cash visibility in your business.

• Auto forecasts the cash flow and sales.
• Real-time cash visibility.
• Advanced modeling of different business scenarios.
• Identifies cash flow trends and patterns.
• One-way sync making cash management easy.
• Forecasts in different currencies for businesses that operate globally.
• One might face challenges while modeling the extremely complex financial scenarios on Dryrun.
• Dryrun falls a little behind compared to specialized tools in terms of advanced analytic features.

Fathom generates rolling forecasts and is a brilliant cash forecasting tool that helps you get real-time insight into your cash flow data.

This cash forecasting software helps you analyze the impact of different scenarios on your cash flow through micro forecasts. It allows you to compare the actuals against your projections and thereby evaluate the financial standing of your business.

Fathom empowers businesses using entry-level accounting solutions to dive deep into analytics and insights for better cash flow management. Visual reporting makes it easier for you to understand the state of cash flow in your business.

• Forecasts based on past records and future assumptions
• Rolling forecasts built using the latest data
• Scenario analysis and assumption testing
• Real-time integration and data syncing
• Consolidated cash flow reporting
• Customizable templates and reporting formats
• Fathom offers fewer advanced functionalities compared to other forecasting tools.
• The functionalities of Fathom are quite difficult for owners who aren’t tech-savvy.
• Limited visualization options for cash flow reporting.

The Bottom Line

As a recap, we have listed 10 cash flow forecasting software serving the objectives of different kinds of businesses.

Within this list, we have mentioned tools that help with scenario analysis, AI forecasting, virtual reporting, budgeting, and much more. Identify what is it that you need help with before subscribing to any of these software.

Like if you are a budding planner struggling to put together forecasts for your financial plan, Upmetrics is what you need. Sign up now and unlock the features that will power you to write a stellar business plan.

Build your Business Plan Faster

with step-by-step Guidance & AI Assistance.

Frequently Asked Questions

Why is cash flow forecasting important for a business.

Cash flow forecasting helps businesses with efficient cash flow management and financial planning. Forecasting helps you predict and manage future cash inflows and outflows so that there is enough capital to maintain operational efficiency. Apart from this, forecasting is essential to build realistic budgets for the future.

What are some popular cash flow forecasting software?

Upmetrics is one of the most proficient systems for cash flow available in the market. It is an AI-powered financial planning tool that helps in predicting the accurate state of cash flow in your business. However, Jirav, Xero, Abacum, and Agicap are equally good software that use advanced algorithms and real-time data to predict your business’s cash flow.

What features should I look for in cash flow forecasting software?

The cash forecasting software you choose should ideally meet your business requirements. Usually, you should choose software that allows you to plan for scenarios, offers essential software integrations, conducts real-time forecasting, and offers control over reporting. Also, compare the pricing plans for this software before you finalize anything.

What types of businesses use cash flow forecasting software?

Emerging startups, small businesses, mid-market companies as well as large organizations- everyone must use forecasting software suited for their business needs.

What factors should be considered when choosing cash flow software?

While the market is loaded with cash flow forecasting software, each promising to be best, here are a few factors that can help you narrow down your choice:

• Pricing plan
• Integration abilities
• Ease of use
• Customization
• Scalability

About the Author

Upmetrics Team

Upmetrics is the #1 business planning software that helps entrepreneurs and business owners create investment-ready business plans using AI. We regularly share business planning insights on our blog. Check out the Upmetrics blog for such interesting reads. Read more

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What Is a Financial Plan? (2024 Guide)

Holly Humbert is a freelance writer who is passionate about entrepreneurship, women in business and financial literacy. In addition to writing, Holly works in marketing helping clients harness the power of social media for their small businesses.

When she is not writing, she is testing out new recipes, tasting the newest Trader Joe’s finds or binging the latest true crime podcast. She resides in Utah with her husband, two daughters and dog, Max.

David Gregory is a sharp-eyed content editor with more than a decade of experience in the financial services industry. Before that, he worked as a child and family therapist until his love of adventure caused him to quit his job, give away everything he owned and head off to Asia. David spent years working and traveling through numerous countries before returning home with his wife and two kids in tow. His love of reading led him to seek out training at UC San Diego to become an editor, and he has been working as an editor ever since. When he’s not working, he’s either reading a book, riding his bicycle or playing a board game with his kids (and sometimes with his wife).

A financial plan is a comprehensive strategy outlining your current financial situation and actionable steps necessary to achieve short-term and long-term goals.

Key Takeaways

• A financial plan is a strategic roadmap to help you achieve your monetary goals. 
• Key components of a comprehensive financial plan include income streams, budgeting, debt and risk management, allocations, retirement planning and more.
• A well-structured financial plan provides clear insight into your financial life, leading to long-term financial health and stability. 

A financial plan is like a map to achieve your financial goals. It involves a clear understanding of your current financial status, creating financial objectives and implementing steps to achieve those goals.

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Personal banking is a big financial decision, especially with the number of product options and rates available in the market. To help you make the best choices possible, we at the MarketWatch Guides team are dedicated to providing you with a comprehensive view of the best banks, credit unions and financial technology products available in the United States. Our team researched more than 100 of the country’s largest and most prominent financial institutions, collecting information on each provider’s account options, fees, rates and terms.

Learn more about our methodology and editorial guidelines .

Key Components of a Financial Plan

You can use a financial plan to accomplish a variety of goals — getting out of debt, saving for a house, preparing for retirement, etc. While the specifics will vary on a person-by-person basis, you generally need to include these key components: 

• Current financial standing : Make an honest assessment of your current financial status, including assets (what you own), liabilities (what you owe), income and expenses.
• Budget: Dive deep into your everyday expenses and income, ensuring your spending aligns with your saving objectives and goals. 
• Financial goals : Establish clear objectives to make your personal finance journey targeted and purposeful. Your goals can include funding education, saving for a home, getting out of debt, and much more. 
• Strategies : Adopt tailored strategies to help you achieve them. Financial strategies include tactics for increasing your income, reducing your debt, investing and more. 
• Insurance coverage : Have adequate insurance coverage, including health, disability, life, car and property insurance, to help protect you from unexpected financial losses and stop your financial plan from becoming unraveled. 
• Retirement and estate planning : Include details on how you’re going to achieve your retirement goals and how you want your assets distributed once you die. 

Benefits of Financial Planning

Financial planning brings a host of benefits. It serves as a guide for everyday financial decisions but can also lay the foundation for future security and wealth.

Creating Your Financial Plan

By methodically walking through the steps below, you can lay the groundwork for financial stability and success. 

1. Assess your current financial situation 

This comprehensive overview sets the stage for informed goal formation. Take inventory of your current financial reality, including your income, expenses, assets, debts and any other financial obligations. 

2. Set S.M.A.R.T. financial goals

S.M.A.R.T. stands for specific, measurable, achievable, realistic and time-bound and is a formula for creating achievable goals. Here’s how each aspect can help you set financial goals:

• Specific : Define your goal clearly. This can be easier in the financial realm because you can assign precise dollar amounts to your goals. Specific goals can enhance your motivation and are easier to track.

For example, instead of “I want to save for a house,” make your goal, “I will save $50,000 in 30 months for my down payment.” 

• Measurable : Without a destination, it’s difficult to know how much progress you’re making. You can measure your bigger financial goals with benchmarks to keep you motivated and on track.

For example, instead of “I will save more money,” make your goal, “I will save $50 a week by bringing lunch from home instead of eating out.” 

• Achievable: It’s important to strike a balance between overly ambitious and modest goals. If you have a particularly large goal, create mini-milestones that promote a sense of accomplishment. 

For example, instead of “I will increase my income by $50,000 next year,” make your goal, “I will initiate a side hustle that increases my income by $300 each month within the next two months.”

• Realistic: Your financial goals should be both challenging and attainable — if they’re not, you could end up feeling discouraged and unmotivated. Ensure your financial goals are realistic compared to your circumstances.

For example, instead of “I will become a millionaire in two years,” make your goal, “I will invest 15% of my income to grow my net worth.” 

• Time-bound: Have a specific deadline. This will help keep you accountable as well as help you stay on track and use your resources effectively.

For example, instead of “I will pay off my house,” make your goal, “I will put an extra $200 toward my principal mortgage balance each month to pay off my home in nine years.” 

Consider meeting with a financial planner or advisor who can help walk you through these steps and give insights to help you craft a financial plan. 

3. Calculate your net worth

Your net worth is your assets minus your liabilities. An asset is anything you own that has monetary value, including cash and cash equivalents, real estate, investments and personal property (e.g., cars, collections or jewelry). Liabilities are obligations you owe, including a mortgage, credit card debt and loans (e.g., car, personal or student loans). 

Net worth can be either positive or negative (if your liabilities outweigh your assets). The best way to increase your net worth is by reducing your liabilities while increasing your assets. 

4. Create a budget

Budgeting is a strategy for ensuring each dollar has a specific role. Following a budget can help prevent wasteful spending on unnecessary purchases, 

For those new to budgeting, zero-based budgeting is a great place to start. This method involves creating a detailed list of your income and expenses for the upcoming month. You should direct any extra funds to a category — this can be saving up for a future expense or investing it for your financial future. 

Another budget plan is the 50/30/20 strategy. This plan aims for you to put 50% of your money toward needs (food, housing, etc.), 30% toward wants (entertainment, hobbies, etc.) and 20% toward savings and debt repayment. 

At the end of each month, no matter what budget plan you use, review how the last month went and note any categories where you under- or overspent. Using this information, readjust your projected expenses for the following month. 

5. Reduce high-interest debt

Reducing high-interest debt frees up significant monthly cash and saves you from paying a hefty amount of interest. The debt snowball method is a popular strategy for debt repayment. It involves listing your debts from the smallest principal balance to the largest and then funneling all excess monthly cash flow to the smallest debt (while continuing to make the minimum monthly payment on all your other debts). 

Once you’ve paid off the smallest debt, you’ll roll that payment (both the minimum and any extra) into the next smallest debt. This process continues until you’ve repaid all your debts. 

6. Build an emergency fund

The majority of Americans struggle to cover a $500 emergency. Having a rainy day fund can protect you against having to borrow money or stress about unexpected expenses.

It’s commonly suggested you have three to six months’ worth of expenses saved in a liquid emergency fund, but this will vary based on your personal risk tolerance. You should store this fund away from regular accounts to avoid dipping into it when it’s not a true emergency. Consider putting it into a high-yield savings account where you can earn interest.

It’s also important to consider other types of emergency protection such as long-term disability and life insurance, especially if you have dependents. 

7. Open investment accounts

There are multiple types of investment accounts you can choose from. Some may be specific for retirement, such as a 401(k) or an individual retirement account (IRA), while others, such as a high-yield savings account (HSYA), are everyday accounts.

Investments are part of a long-term plan, taking advantage of compound interest and growth over many years. Working with a financial advisor can help you figure out what investments would be right for your situation and risk tolerance levels. 

The Bottom Line: Financial Planning

Financial planning is a dynamic process that requires regular review and adjustment. A financial plan outlines your current financial status, goals and the steps and strategies necessary to achieve your financial objectives.

Essential components of a financial plan include income, debts, risk, budgeting, investments and retirement and estate planning. Periodically reassessing your plan can help ensure it stays aligned with your current situation and future goals.

FAQ: What Is a Financial Plan?

What are the key elements of a financial plan.

The key elements of a financial plan are assessing your current financial standing, creating S.M.A.R.T. goals, calculating your net worth, creating a budget, reducing high-interest debt, building an emergency fund and opening investment accounts.

How often should I review and update my financial plan?

You should revisit your financial plan at least once per year. If you experience significant life events or financial fluctuations, it may be necessary to adjust your financial plan every few months.

What are some common mistakes to avoid when creating a financial plan?

Common pitfalls include setting goals that are not specific, measurable, achievable, relevant and time-bound. Other common mistakes include underestimating your expenses, particularly those that are less frequent or unexpected, ignoring debt and failing to update your financial plan as your life evolves.

Editor’s Note: Before making significant financial decisions, consider reviewing your options with someone you trust, such as a financial adviser, credit counselor or financial professional, since every person’s situation and needs are different.

Money blog: Italy wants Britons to come 'work from home' there for a year

Italy is allowing Britons who can work remotely to apply for a year-long "digital nomad" visa. Read this and the rest of today's consumer and personal finance news in the Money blog, and leave a comment or home gym hack in the form below.

Wednesday 10 April 2024 19:00, UK

• Britons can now 'work from home' in Italy for a year
• Rise in passport costs from tomorrow
• Cheap Eats : Great British Menu legend shares ultimate toastie recipe
• Could I build a home gym for less than my gym membership?
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The tweet below on the price of olive oil has gone viral - so we thought it was a good opportunity to resurface our feature from March that explains what's going on.

At the time, our  spending calculator  revealed the average price of a 500ml bottle of olive oil had risen from £3.54 in January 2021 to £7.45 now - an eyebrow-raising jump of 110.5%.

We spoke to experts about why - and here's what we learned...

Groves becomes graveyards

We start in Italy, where, according to a  survey by the polling firm Istituto Piepoli , 45% of consumers have rediscovered seed oil in the kitchen, and the industry is facing an existential crisis.

Mike Carlucci, managing director of the Italian food importer  Tenuta Marmorelle , says production in parts of Italy is becoming impossible due to a natural disaster that has nothing to do with the climate.

"The events of the past 10 years have made olive oil production in Puglia [which produces 40% of Italy's olive oil] almost impossible," he said. "This is due to the rising bacteria disease Xylella Fastidiosa."

The disease attacks and kills century-old olive trees, severely diminishing yields.

It spreads about 20km to 25km a year, Mike says, leaving a "graveyard of withered and barren trees which were once stunning beautiful olive groves".

Many producers have been forced to replace their trees with more resilient varieties but...

"Even if the new trees manage not to succumb to Xylella, it will be at least nine to 12 years before they produce a notable amount of oil," says Mike.

While prices are up across the continent, in the UK another factor is in play: Brexit.

"The cost of customs documentation leaving Europe and entering the UK is approximately £95 per shipment," says Mike.

"Transporters have all imposed a Brexit surcharge for extra admin duties performed by them in the importation of goods from Europe."

Pallets coming into the UK from the continent are now subject to more stringent fire resistance rules - meaning the cost of pallets has "tripled, even in some cases quadrupled".

'Never had a shortage like it'

Another issue, as has been widely reported, are the wildfires and droughts in southern Europe last year.

These weather events have lead people to extreme measures, according to Sarah Vachon, olive oil sommelier and founder of  citizensofsoil.com .

"You can ask the elders in the villages in Greece and they've never had a shortage like this," she says.

"I see lots of producers selling their previous harvest's oils, since they're able to get a high price for it and might have held on to it over the year. 

"This means the consumer is not getting fresh EVOO. And when it's not fresh, it not only loses its flavour, but it also loses a lot of the health benefits (namely antioxidants like polyphenols) which drop significantly over time."

On top of climate change, there's a flood of cheap sunflower oil coming from Ukraine - so while the price of olive oil is going up, the cost of alternatives are going down.

200 trees stolen overnight

The result is an industry in crisis - and organised criminals are taking advantage.

"Around half of the farmers I work with have a story to tell about thieves stealing their liquid gold," says Sarah.

"Sometimes it's the oil itself, or the olive fruit at the groves, or even an insane story from one of our producers about thieves coming in the night and uprooting 200 freshly planted trees."

Maria Dawson, managing director of the organic food seller Clearspring, says the industry is seeing "some of the lowest levels of olive oil production for five decades and unfortunately a shortage of supply".

The company has managed to secure a stable supply for the coming year, but Maria expects the market to remain uncertain - with no price reductions in the near future, even if 2025 brings better harvests.

Olive oil sommelier Sarah isn't hopeful, either.

"Olive oil is already facing record prices, and the way the climate is changing across the Mediterranean basin (which is warming 20% faster than the rest of the world), the shortages we've seen will likely continue."

Euan Blair's apprenticeship company Multiverse will use AI to pick prospective job applicants.

The son of the former prime minister Sir Tony Blair has bought talent intelligence platform Searchlight, whose artificial intelligence technology claims to identify candidates for job vacancies four times more effectively than traditional methods, for his firm.

It does this by removing the biases and assumptions that may affect decisions by managers and then shortlisting candidates.

According to Searchlight's website it reduces "unconscious bias" with "impartial AI algorithms designed to catch what the human eye may miss".

It also provides "rigorous analysis" of work experience and hard and soft skills.

Mr Blair said what often held companies back was "the gap between the transformation they want to see, and the skills that will unlock it".

"Searchlight's AI, platform, and exceptional talent will allow us to better diagnose the skills needed within companies and deliver impactful solutions," he said.

Multiverse was founded by Mr Blair in 2016 and has since grown across the UK and US.

It works with more than 1,500 companies, including Microsoft, Citi and Just Eat, and has trained more than 16,000 apprentices.

Premier League club Crystal Palace has come under fire after a bereaved fan was told he would need to pay extra to transfer his late father's season ticket to another member of his family. 

Haris Armstrong said his sister, to whom the season ticket would be transferred, would've had to pay extra for the ticket - something the club later put down to poor communication. 

"I was told that I actually would not be able to renew my dad's seat on the early bird offer and that as it was my sister's first ST, she would be charged at a higher rate," Mr Armstrong said in a post on X.

He was also told that loyalty points accrued by his father over many years were non-transferrable when he asked that they be given to his sister. 

The Palace fan said there was "essentially no mechanism to transfer an ST upon someone's death. The surviving family get penalised and have to pay more money."

Mr Armstrong's post went viral and has been widely discussed by fellow fans online. 

He accused the club of looking to "financially capitalise on someone's death". 

Mr Armstrong labelled the handling of his request "careless, greedy and insensitive" and an "absolute disgrace".   

After we reached out to the club, Crystal Palace spoke to Mr Armstrong, who issued a subsequent clarification. 

He said he was told the "price issue was an admin/staffing error and apparently early bird tickets should always be offered when fans pass away". 

Mr Armstrong also said he and the club discussed bereavement policy "so things like this don't happen again".

Crystal Palace told Sky News: "We are very sorry for the loss of Mr Armstrong's father and we send our condolences to his family. 

"The club's policy in these circumstances is to allow the friend or family member who is part of a group to retain the seat for another friend or family member on the same terms if they want to keep it. 

"Mr Armstrong's father did not take advantage of the early bird discount but paid in monthly instalments; however, if the family member taking the seat prefers to use the early bird discount, then we are happy for them to do so. 

"We apologise if this was not communicated clearly.

"Regarding loyalty points, the policy has been [that] these do not transfer as they are linked to a named individual; however, in the light of these circumstances we will review this. In any event, supporters can buy an away season ticket to guarantee every game."

US inflation increased more than expected in March - in a blow for hopes of an imminent interest rate cut.

Americans paid more for gasoline and rental housing in the month, helping push consumer price rises to 3.5% - up from 3.2%.

It is a stark warning to other economies that the path back to the internationally recognised 2% target is not always smooth.

Financial markets now anticipate the Federal Reserve will delay cutting interest rates until September. 

Profits at Tesco have reached £2.83bn - up more than £300m from a year earlier - as the UK's largest supermarket group said it had brought down prices.

More people are shopping at  Tesco , due to improved product value and quality, the company said.

Profits topped £2.83bn last year, up from £2.5bn a year earlier, while the amount of money Tesco took in was also up.

Read the full story here ...

For the last four months, one of the biggest talking points in the betting and gaming industry has been who will become the next chief executive of Entain, the FTSE-100 combine whose businesses include Ladbrokes, Coral, Gala Bingo, Bwin and BetMGM.

The post was vacated when, 11 days before Christmas, the  former incumbent Jette Nygaard-Andersen unexpectedly resigned  with immediate effect.

Since then, the job has been done on an interim basis by Stella David, former chief executive of William Grant & Sons, the Scotch whisky group behind brands such as The Balvenie and Glenfiddich - but the hunt remains ongoing for a permanent CEO.

One of the favourites for the role has now ruled himself out.

Richard Flint, who is well regarded in the industry after his successful stint as chief executive of Sky Betting and Gaming, set tongues wagging when he recently announced he was stepping down as a non-executive director of Flutter Entertainment, the new owner of SkyBet and parent of Paddy Power and Betfair.

However, Mr Flint has told Sky News he is not seeking another executive position.

Read business presenter Ian King's full story here ...

A British diamond manufacturer has had its adverts banned for not making clear its gems are synthetic.

The ads for Skydiamond had the headline: "Say hello to the world's first and only diamond made entirely from the sky."

In small text below, the company said it made diamonds using the four natural ingredients of the "sun, wind, rain" and "atmospheric carbon".

"Now that we can mine the sky, we never need to mine the earth again," it read.

Skydiamond also responded to a question on its FAQ page about whether they were real diamonds with: "Skydiamond is a perfectly formed real diamond."

The adverts sparked a complaint from the Natural Diamond Council, which believes the gems are lab-created, but the Sky Mining Company, which trades as Skydiamond, said they made clear they were not naturally occurring or mined from the earth.

The Advertising Standards Authority sided with the Natural Diamond Council.

"We considered that while some consumers may have been aware that synthetic diamonds could be manufactured or created in a laboratory, many would not," it said.

Application fees for new passports are rising tomorrow by about 7% - so get in quick if you need to renew yours. 

It's the second year in a row that passport application prices have increased, following a 9% rise in February 2023. 

Here is a breakdown of the price increases... 

Adult - £88.50 , up from £82.50

Child - £57.50 , up from £53.50

Paper form 

Adult - £100 , up from £93

Child - £69 , up from £64

Fast track (one-week service) 

Adult - £166.50 , up from £155

Child - £135.50 , up from £126

Premium (same-day service) 

Adult - £207.50 , up from £193.50. 

It could be worth renewing now if you have less than 10 months left on your current passport. 

Some countries - such as Turkey, Thailand, Egypt and Singapore - require you to have at least six months' validity on your passport. 

If you're travelling within the EU, your passport...

• Must have been issued less than 10 years before the day you enter the EU/Schengen Zone 
• Must be valid for at least three months after the day you plan to leave.

The cheapest way to renew is through the gov.uk website, and you can expect to get your passport within three weeks for standard applications. 

Italy is allowing Britons who can work remotely to apply for a year-long "digital nomad" visa.

The scheme opened for applications for non-EU citizens at the end of last week - having been talked about for years.

Anyone wanting to take advantage needs to meet a few criteria, according to Italian law firm Studio Legale Metta - including:

• A university or college degree (minimum three years) from an accredited institution, an accredited professional licence, or accredited superior professional experience.
• At least six months in the industry in which they intend to work remotely.
• A work contract and a salary of at least €28,000 (£24,000).
• No specific immigration crimes within the past five years. 
• Evidence of a place to stay in Italy. 
• Health insurance. A private medical insurance usually costs between €350-700 a year.

The firm advises applying four to five months in advance.

Italy is trying to encourage growth amid an aging population.

A charity boss providing free haircuts for the homeless says it is helping people on the streets feel less "invisible".

Haircuts4Homeless, founded by Stewart Roberts, has 80 centres across the UK and has delivered 60,000 haircuts over the past decade.

Mr Roberts told Sky News' Breakfast with Kay Burley that some people have had "no communication with anyone" before getting their hair cut.

"Sometimes it's a quiet one, sometimes they just open up and... they tell you their stories," he said.

He said the situations charity staff hear of can be "really sad", but they also manage to have "amazing laughs" during the sessions.

Mr Roberts said he celebrated 18 years of sobriety yesterday and has struggled with drug problems in the past.

"I really relate to people and the struggles that they have," he said, though he noted it was a "misconception" that everyone on the streets was an alcoholic or a drug addict.

"But often it's the case that they will turn to that and you can't really blame them when they're in such bad positions," he said.

Asked how people can help, Mr Roberts said the charity is always looking for volunteers and sponsors as it "doesn't run itself".

"The main thing is, we're trying to humanise the face of homelessness. It's making sure that you spread our message out," he added.

The popular comedian has lamented increasing prices for performers wanting to take part in Edinburgh Festival Fringe. 

Manford said prices, especially for accommodation, were an "absolute joke" and were fuelled by "pure greed". 

"I've just priced up a week up there and even if every show sells out, I'm still operating at a loss," he wrote on social media site X. 

The comedian said this was less of a problem for him "as it's part of a much bigger tour" and because of the "stage of my career" but he feared it would shut out new performers. 

"No idea how anyone starting out is managing to get up there and showcase their talents!" he said. 

Manford said if prices stay high then "the only people who can do it are people with money or backing". 

A quick search on Booking.com puts the price of the hotel for the duration of the festival at about £4,000 upwards (looking at places with three stars or above) - although many are charging much more. 

One of five Bulgarian nationals who falsely claimed £50m in Universal Credit filmed themselves throwing a stack of £20 notes in the air.

The criminal threw the notes one by one and waited for an unknown woman to pick them up.

Stacks of cash tied with rubber bands were also shown in a separate video.

The benefit fraud gang made thousands of false claims for Universal Credit using either real people or hijacked identities and backed them up with an array of forged documents, including counterfeit payslips and fake GP letters in the largest prosecution of its type in English legal history.

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