Free Financial Forecast Template

August 5, 2021This page was updated 10th August 2022.No matter how long your business has been operating or how well established it is, it's always worth planning for the future. Consumer habits and market trends can quickly change and failure to prepare or adapt can leave you behind your competitors. Being able to identify opportunities and spot problems early before they have too great an impact can sometimes be the difference between success and failure. It's not a coincidence that businesses in strong financial positions are the ones who take the time to plan for all kinds of eventualities. But how do you do this?One option is to carry out a financial forecast. Let's say you're a small business looking to expand your product range. How do you know what impact this will have on your performance and finances? By estimating your projected income and expenses you can establish over a period of time what impact any changes will have and what the profitability of these changes are likely to be.In this article, we'll cover what a financial forecast does, the many benefits of carrying out a financial forecast and how to use our free template.

What is a financial forecast?

A financial forecast is an accounting process used by businesses to predict future financial performance based on past history and/or current market growth and trends.By looking at current income and expenses, you can estimate how your business will perform in the future. While a financial forecast can only predict what might happen, it can be vital for helping make business decisions on budgeting, operating expenses, recruiting new staff, securing investment and planning for unforeseen eventualities.You can use a forecast to predict short and long-term performance, but typically it will be used to plot out the next 1-3 years. Keep in mind that the further into the future you predict, the more likely it is that conditions and variables will change — which is why it's so important to re-visit your forecast regularly to reflect your business's actual performance.There are a couple of different ways to run a financial forecast, but to get a complete picture our template includes:

What are the benefits of financial forecasting?

Look for investment 

Whether you are starting a new business from scratch or looking to expand your company, you might need the help of additional funding. But how do you gain an investor? What grabs their attention? Investors want to know you have a solid business plan, a vision of where you are headed, and ultimately, that they stand a good chance of making a return on their investment (ROI). A financial forecast is something you can provide to an investor to demonstrate how you expect your business to perform over a given period of time. It won't be 100% accurate, but it's a clear indication of what you expect to achieve. 

Make business decisions

Business owners constantly have to make important decisions about short and long-term activities. You might want to expand into a new market, diversify your range of goods, source new investment or grow your number of employees.But if you don't have all of the necessary information to hand, how can you make the right call? Having a solid grasp of your current finances and future estimates will help you make better informed and more accurate decisions.

Understand your finances 

One of the problems a lot of startups face is cash flow shortages. There is usually money going out every month, but the money coming in isn't always a regular amount. By creating a financial forecast, you'll be able to conduct a thorough financial analysis to identify any areas where losses are occurring and help you to reallocate your budget accordingly.

Financial planning

How can you be confident that what you are hoping to achieve is realistic? With financial forecasting, you can use your current financial position to plot a course in the future. For instance, if you want to launch a new product you can work out the anticipated increased costs of materials, equipment and labour to see how they impact your growth. A financial forecast is also really useful for ruminating the possibilities. If you experience a boom in sales, how quickly could you pay off your debts? Or, if there is a fault with your machinery and you lose a week of production, how would that affect your cash flow for the month? You can come up with any number of best/worst-case scenarios to help you plan for the future. 

Keep you on track 

Once you've run your financial forecast it's important not to just leave it to one side. Regularly re-visiting your forecast allows you to see how accurate your predictions are based on your current metrics. Keeping your forecast updated enables you to build in the most current financial data available, recording any changes in pricing, the cost of goods sold and your net income, so your predictions for the future remain as accurate as possible.

What is the difference between a financial forecast and a financial budget?

If you've previously mapped out a budget and don't think you need to bother with a forecast, then you may want to reconsider. A financial budget is a plan of the financial goals you want to achieve and how you want your business' finances to look after a given period of time. A forecast, however, is a prediction of what you expect to achieve in that timeframe.Budgets are great for the management of short-term projects but they are static and don't allow for changes in circumstances or market trends. If you want to predict your growth for the future, you will need to use a forecast.

What to do before using our template

Choose what type of forecast method to use

In order to calculate your forecast, you need to base it on data. You can either do this using quantitative or qualitative forecasting methods or a blend of the two. You will use this method to establish your expected level of growth and see how this impacts your financial statements. Quantitative forecasting involves using your past financial history to make assumptions as to where the business will grow or decline. As an example, let's say that in the past 12 months you have made 5,000 sales, but more than half of them came in the last 3 months. Using this data you can extrapolate the performance over the next year to estimate revenue, expenses and profit if sales continue at their current rate.Qualitative forecasting involves using opinions from customers and industry experts to make assumptions on future outcomes. It might be used when companies are launching a completely new service or product, or in industries where market trends are constantly shifting. An example would be a clothing company analysing market growth and competitor performance to make assumptions on what clothing styles will increase or decrease in sales.Qualitative forecasting is usually more complex and time-consuming and often relies on hiring experts to review buying patterns and trends and interviewing or surveying members of the public. If you're part of a fast-changing market, it makes sense to spend time on a qualitative forecast, but for startups and smaller businesses, a quantitative forecast is much quicker and easier to do. 

Get all of your financial records together

The more information you are able to base your forecast on, the more accurate it will be. If you are used to doing manual calculations, then you will need to get pull together all of the financial statements you have available. 

Decide what time frame your forecast will cover

A financial forecast can cover any time period you like. If you are a new business then you may want to only cover the first six months, whereas a more established business will usually predict the next couple of years. It is important to note that the further into the future you predict, the less accurate it is likely to be. This is because there are many variables that are bound to change, such as the cost of materials, rent, staff salaries etc. 

How to use our financial forecast template

Thankfully, you don't have to do any of the hard work because here is one we made earlier!Our template is easy to use and calculates future predictions based on the information that you input.

Start here

The first tab is a list of questions and statements you can work through relating to:
    General informationSales informationAdmin and start-up costsAdministrations costsEmployee informationKey information
Everything you input feeds into the financial forecast so it is important to be as accurate as possible. When inputting the details you need to make certain assumptions based on your current performance, either using quantitative or qualitative methods. For instance, if you increase the expected cost of sales, what would the total additional revenue be? Or, how would giving all of your staff a pay rise affect total expenses? When making these assumptions it is worth doing a couple of calculations for different scenarios. This gives you a better understanding of what the future looks like if the best or worst-case scenario were to happen.


This tab lists all of the information in the three main financial statements. By using all three, it provides a more accurate and complete picture of your current and future financial performance.

Profit and loss account

The profit and loss account, also known as the income statement, is used to record your sales, expenses and profit. It shows your:
    Sales: the total income receivedCost of sales: the total cost to produce goods (only direct expenses)Expenses: All other expenses e.g. salaries, rent, marketing etc. (indirect expenses)

Balance sheet

The balance sheet lists your business assets (what you/shareholders own) and liabilities (what the business owes). As the name suggests, the balance sheet should always be equal and is based on the formula:Assets = Liabilities + Shareholder's equityIf you are looking for funding, your balance sheet will be of particular interest to investors as it gives them an idea of what is happening within the business.

Cash flow statement

The cash flow statement shows you how much money is coming into the business and how much money is going out. Any business without sufficient cash available will struggle, so this statement helps you to see where your money is being used. If your forecast doesn't look too good, you'll need to start taking steps to improve your cash flow management.


This tab highlights how much the business is spending on salaries in a given year or month and is based on the information you input in the 'Start_Here' tab'. If you want to forecast if you can afford to provide an employee with a pay rise or hire a new member of staff, simply add the new details to the employee section. 


The sales tab shows your monthly sales total and your direct costs as a percentage of this amount. This can be really useful for seeing the impact of how your direct costs cut into your profit. If you are able to lower your direct costs then the percentage of your sales total also drops. Once you've added all of the relevant information you can see a clear picture of what your business is likely to be able to achieve. The beauty of the template is that you don't only have to run these figures once. Make different assumptions in best and worst-case scenarios and see how they impact your sales, staffing costs, or expenses. By planning for the future you can make real-time decisions in the present without just relying on a hunch. And if you find yourself re-visiting this Excel template over again, you might want to consider joining Ember. Our fuss-free accounting solution has a whole host of features to help make managing your business simpler and easier, including generating financial statements in just a couple of clicks.

Free Financial Forecast Template

See all the financial possibilities for your business with our free downloadable financial forecast template.