In supporting entrepreneurs with their financing requests, one observation stands out. The document that makes the difference with a banker is not the narrative business plan with its beautiful SWOT analysis. It's the cash flow forecast table.
Why? Because the banker asks himself only one question: "Will this company be able to repay the loan installment each month?" The cash flow plan directly answers this question.
The structure of a good cash flow plan
Cash inflows (what comes in)
List month by month:
- Revenue collected (attention: not revenue invoiced, but what is actually collected, taking into account payment terms)
- Subsidies and aid
- Capital contributions
- Loan disbursements
- VAT refunds (if applicable)
Cash outflows (what goes out)
- Purchase of goods / raw materials
- Rent and rental charges
- Net salaries
- Social contributions (delayed by one month)
- Taxes and duties
- Insurance
- Fees (accountant, lawyer)
- Loan repayments
- Investments
- Communication and marketing expenses
- Travel expenses
- Miscellaneous and contingencies (5% of total outflows)
Monthly balance
Cash inflows - cash outflows = balance for the month. Added to the previous month's balance = available cash at the end of the month.
The 4 errors that discredit a forecast
1. Revenue that rises in a straight line — your forecast shows +15% each month without the slightest decline? The banker won't believe it. Incorporate the seasonality of your activity, a slow month in August, a gradual start. The credibility of the whole thing is at stake.
2. Underestimated expenses — forgetting the manager's social contributions, mandatory health insurance, bank fees, equipment renewal. The banker knows the typical expenses of your sector: if he sees a gap, he will ask about it.
3. Working capital ignored — you invoice 10,000 euros in January but you won't be paid until March (60-day delay). If your cash flow plan shows 10,000 euros in January, it's wrong. The gap between invoicing and collection is the primary cause of cash flow shortfalls.
4. No degraded scenario — the banker wants to know what happens if your revenue is 20% below forecast. Add a "pessimistic scenario" tab with degraded assumptions. If cash flow remains positive even in that case, you score points.
How to present the forecast to the banker
Prepare the table for a minimum of 18 to 24 months. The banker wants to see beyond the first year, because it's often the second year that causes problems (end of aid, first repayment installments).
Explain each assumption. The revenue for month 3 is 8,000 euros: what are you basing this on? How many customers, what average basket, what acquisition source? The more documented your assumptions, the more the banker trusts you.
Show that you know how to manage. An entrepreneur who arrives with a structured cash flow plan shows that he knows how to manage. It's a signal of competence just as important as the figures themselves.
A good cash flow forecast is 80% rigor and 20% intellectual honesty. Better a realistic plan that causes some concern than an optimistic plan that doesn't hold up.