A growth move is affordable when the cash forecast, with the move's costs and receipts entered on the dates the cash will actually move, stays above your cash floor in every month between the first payment and the point where the move has paid for itself, and still does so in a downside case. That is the whole rule. It needs four things from the forecast before you commit: the outflows on their dates, the receipts on their expected dates, the lowest balance the move produces and when, and the cash tied up until payback. A move that fails is not necessarily a bad move. It is a move that lands before the cash does, and the same forecast usually shows the start date or the size at which it passes.
What Affordable Means On A Cash Forecast
No professional body publishes an affordability test for growth in cash-forecast terms. What the bodies do publish are the parts. The Insolvency Service tells directors to have funds for regular and unexpected expenses before expanding. ACCA's guide for entrepreneurs lists the questions to ask before committing to an investment, including how quickly it pays for itself, and adds that the longer it takes, the higher the risks are likely to be. ICAEW's nine principles for cash flow forecasting, published in November 2022, say to produce worst, most likely and best-case scenarios and to predict the earliest date additional funding may be required (Principle 4), to document assumptions with a probability attached (Principle 5), and to assign expected, worst-case and best-case dates to receipts and payments (Principle 8). The Financial Reporting Council's factsheet on going concern for small companies, issued in September 2025, describes a cash flow forecast as showing the adequate matching, of both the timing and the amount, of projected cash inflows with projected cash outflows.
Put those together and you have a test, which is the one this page uses:
- Dated outflows. Every cost the move creates, on the date the cash leaves, including the ones that follow a month later.
- Dated inflows. Every receipt the move generates, on the date the cash is expected to arrive, with a probability against any receipt that is not certain.
- The trough against the floor. The lowest balance the forecast reaches with the move in it, the month it falls in, and whether it clears the floor in the base case and in a downside case.
- Cash tied up until payback. How much cash the move holds, for how long, before its own receipts have repaid it.
The rule is ours, assembled from the parts above. Two things it does not do are worth saying at the start. It does not tell you whether the move is a good idea; it tells you whether the business can carry it on the dates in front of you. And it does not need a discount rate, a hurdle rate or an investment appraisal model. Those methods answer a different question, which is whether the move creates value. This one answers whether you will still have cash on the 22nd of February.
Why Timing Decides It, Not The Amount
Growth moves fail on cash because of when the money moves, not how much of it there is. A hire starts, a supplier is paid and a marketing programme runs for months before the first receipt they generate arrives, and that receipt arrives at your customers' payment speed, not your invoice terms. Our guide to why growth makes cash lumpier works the mechanism through one contract over one quarter, and our guide to why profitable businesses run out of cash sets out why the management accounts do not show it. This page assumes both and does not repeat them.
What follows from the mechanism is that the same move can be affordable in March and unaffordable in November. The amount is identical. What changes is what else is leaving the bank in the months the move is still unpaid for: the VAT quarter, the corporation tax payment nine months and a day after the year end, the December quarter's rent, the third payroll of a quarter in which two large customers paid late. An affordability test that looks only at the annual cost of the move, or at the average balance, misses exactly the collision the forecast exists to show. That is why the test above reads the trough and the month, never the total.
The FRC's factsheet makes a related point about who is doing the reading. It says directors should be aware of their own potential bias, overestimating positive outcomes and underestimating negative ones. A growth move is the business's own idea, which is the strongest case for testing it on a downside as well as on the numbers its sponsor supplied.
The Four Things The Forecast Has To Show Before You Commit
Where the cash leaves, and when. The move's cost is a list of dated payments, not a figure. For a hire it is the net pay on payday, the PAYE and National Insurance on the 22nd of the following month (HMRC wants cleared funds by the 22nd for electronic payment, so a Bacs payment goes on the last working day before), the pension contribution, the recruitment fee a month after the start, and the equipment in the first week. For a stock build it is the supplier's terms from the delivery date; for a marketing programme, the monthly spend from the month it starts. Any date that is a guess is written down as an assumption. The rates behind an employment cost are statutory: for 2026/27, employer's National Insurance is 15% on earnings above £5,000 a year, and the minimum employer pension contribution under automatic enrolment is 3% of qualifying earnings between £6,240 and £50,270.
Where the cash comes back, and when. Every receipt the move is expected to generate goes in on its expected date, which is your customers' actual payment speed applied to the date you expect to invoice. A customer on 30-day terms who pays at 40 is a 40-day receipt. Where the receipt depends on something uncertain, such as a new territory producing its first orders, ICAEW's Principle 5 gives the form: this customer will pay this amount on this date, with this probability. The forecast should show the expected case, and the downside below should show what happens if the receipts slip.
The trough, the month and the floor. With the move's lines in, read the lowest closing balance across the horizon and the month it falls in. Then compare it with the floor. The floor is the balance below which the business should not go, and it is set before the move is considered, not adjusted to fit it. Our guide to how much cash a business should keep in reserve covers how to size it; ICAEW's guidance that three months of operating costs is a good minimum goal is a starting point, and your own fixed calendar of payroll, tax and rent is the better one. The cash above the floor is your headroom. The Association of Corporate Treasurers uses that word in more than one sense: for the undrawn part of a borrowing facility, and more generally for any measure of financial or operational flexibility or safety margin; in its own short-term forecasting example it labels a minimum bank balance as headroom, and it notes that treasurers differ on whether to count cash balances alongside facilities. For a business of 11 to 50 people with a bank account rather than a treasury, headroom is cash above the floor, and that is how this page uses it.
Cash tied up until payback. ACCA defines the payback period as the length of time it takes for a project's net cash revenue or savings to pay back the initial investment, and it is the one appraisal measure that is read straight off a cash forecast. ACCA also lists its limitations: it ignores cash flows after the payback point, it needs a target that is difficult to set and arbitrary, it ignores the effect on the value of the business, and it ignores the time value of money. For the affordability question those limitations do not matter, because the question is not whether the move is worth doing but how long the business is carrying it. Read two numbers: the most cash the move has out at any point, and the month its cumulative receipts overtake its cumulative costs. No body prescribes a maximum payback. ACCA describes businesses setting their own target and rejecting projects that exceed it, and calls the choice arbitrary, so this page sets no number either.
A Worked Example: Three Growth Moves, One Forecast
Every figure below is invented for the example and labelled as such; the statutory rates and dates are real. The business is a 30-person company with revenue of around £4.5 million, a finance team of three, one entity, two bank accounts and Xero as its accounting platform. Customers are on 30-day terms and pay at around 40 days. The finance director has set a cash floor of £110,000, sized from the November and December collisions of payroll, PAYE, the VAT quarter and the December rent. The forecast is read month by month over twelve months from October 2026, with a weekly view for the next thirteen weeks; the monthly figures are used here because the moves play out over a year.
The base forecast contains only committed cash: the reconciled opening balance, the fixed calendar, open invoices at their expected dates, and the payroll for the existing team. The downside case changes two assumptions in the base business and nothing else: the two largest customers slip from 40 days to 55 from November, and one contract renews in April at 15% less. Closing balances at each month end:
| Month | Base forecast | Downside case |
|---|---|---|
| October 2026 | £182,000 | £177,000 |
| November | £168,000 | £160,000 |
| December | £151,000 | £143,000 |
| January 2027 | £156,000 | £142,000 |
| February | £145,000 | £130,000 |
| March | £171,000 | £156,000 |
| April | £178,000 | £161,000 |
| May | £169,000 | £151,000 |
| June | £186,000 | £167,000 |
| July | £181,000 | £163,000 |
| August | £172,000 | £154,000 |
| September | £190,000 | £171,000 |
Both cases clear the floor in every month without any growth move. February is the tightest month in both. Three moves are on the table for the same quarter, each entered as its own layer on top of the base:
Move A, a marketing programme: £10,000 a month for six months from November. On the sponsor's own numbers, attributable receipts begin in the fifth month at £6,000 and build to £16,000 a month by June.
Move B, a stock build for a spring product line: two supplier payments of £15,000, on 20 November and 18 December. Sales are invoiced monthly from December and paid at 40 days: £14,000 in February and March, then £12,000 in April and May.
Move C, a hire to open a second territory: a £45,000 salary from 1 November, which costs about £4,350 a month with employer's National Insurance at 15% above the £5,000 threshold and a 3% pension contribution on qualifying earnings. Assume about £2,850 of that leaves on payday and about £1,500 follows a month later as PAYE, National Insurance and pension; the exact split depends on the person's tax code. On top of that, £1,500 a month in travel, £2,000 of equipment in the first month and a recruitment fee of £9,000 paid a month after the start. First orders are expected in the fourth month and, at 40 days, the first receipts in the fifth: £6,000, then £9,000, then £12,000 a month. Our guide to whether you can afford your next hire sets out the employment cost lines by payment date; this page takes them as one line.
Here is the cash each move has out at each month end, cumulatively, with the hire shown at two start dates and the marketing programme at its proposed size and at a resized version discussed below:
| Month | B: stock build | C: hire from November | C: hire from February | A: £10,000 a month from November | A: £5,000 a month from January |
|---|---|---|---|---|---|
| November | £15,000 | £6,350 | £0 | £10,000 | £0 |
| December | £30,000 | £21,200 | £0 | £20,000 | £0 |
| January 2027 | £30,000 | £27,050 | £0 | £30,000 | £5,000 |
| February | £16,000 | £32,900 | £6,350 | £40,000 | £10,000 |
| March | £2,000 | £32,750 | £21,200 | £44,000 | £15,000 |
| April | repaid, £10,000 ahead | £29,600 | £27,050 | £44,000 | £20,000 |
| May | £22,000 ahead | £23,450 | £32,900 | £30,000 | £22,000 |
| June | £22,000 ahead | £17,300 | £32,750 | £14,000 | £22,000 |
| July | £22,000 ahead | £11,150 | £29,600 | repaid, £2,000 ahead | £15,000 |
| August | £22,000 ahead | £5,000 | £23,450 | £18,000 ahead | £7,000 |
| September | £22,000 ahead | repaid, £1,150 ahead | £17,300 | £34,000 ahead | repaid, £1,000 ahead |
Now the test, one move at a time, each against the base and the downside:
| Move | Tightest month, base | Tightest month, downside | Result | Most cash out | Payback |
|---|---|---|---|---|---|
| B: stock build | December, £121,000 | January, £112,000 | Passes both | £30,000, over five months | April 2027 |
| C: hire from November | February, £112,100 | February, £97,100 | Passes the base by £2,100; fails the downside by £12,900 | £32,900, over ten months | September 2027 |
| C: hire from January | February, £123,800 | February, £108,800 | Passes the base; fails the downside by £1,200 | £32,900 | November 2027 |
| C: hire from February | May, £136,100 | May, £118,100 | Passes both | £32,900 | December 2027 |
| A: £10,000 a month from November | February, £105,000 | February, £90,000 | Fails both | £44,000, over eight months | July 2027 |
| A: £5,000 a month from January | February, £135,000 | February, £120,000 | Passes both | £22,000, over eight months | September 2027 |
Read the hire's row first, because it is the case the rule exists for. From a November start the base case says yes, by £2,100 in February. The downside says no, by £12,900 in the same month. A business that reads only its base forecast hires in November and finds out in February, when two customers pay late, that it is £13,000 below the balance it promised itself it would not go under. Moving the start to January still fails, by £1,200, because the hire's second month, the one with the recruitment fee in it, lands on the base forecast's own low point. Moving it to February passes with £8,100 of margin on the downside, and the tightest month moves to May, when the hire's costs peak a month before its first receipts. The move did not change. The date did.
The marketing programme fails at its proposed size in both cases, and not narrowly. At £10,000 a month it has £40,000 out in February, the month the base business is tightest. Halved and started in January, it passes both cases with room to spare, holds £22,000 out at most, and pays back two months later than the full programme would have. Whether half the programme produces half the receipts is the sponsor's assumption to defend; the forecast shows what the business can carry while they find out.
The stock build passes both cases and pays back in April. It is the least cash for the shortest time, and it clears the floor with a margin in the two months, December and January, when the whole £30,000 is out.
Two things the table does not show. The first is that the hire's tightest month at a February start, May, sits seven months out, and its payback sits fourteen months out; a forecast that stopped at March would have shown the hire clearing every month it could see and said nothing about the month that matters. The forecast has to run at least through the move's tightest month, and the payback is read from the move's own line however far out it falls. The second is weekly resolution. The stock payment on 18 December and the December payroll on the last working day fall in the same fortnight as the 22 December PAYE payment, and a monthly closing balance hides where in the month the balance was lowest. Our guide to the working-capital gap shows the same quarter week by week; for a move whose payments cluster inside a month, that is the view to read.
How To Test Whether A Growth Move Is Affordable
Step 1: Start from a base forecast that contains only committed cash. The reconciled balance across every account and entity, the fixed calendar of payroll, PAYE and National Insurance, VAT, corporation tax, rent and loan repayments on the dates the cash leaves, and every open invoice and bill at its expected date. Signed contracts and confirmed hires are in the base; anything not yet committed is not. Our guide to running cash flow scenarios for big decisions covers how to build the base and the layers on it.
Step 2: Set the floor before you look at the move. Decide the closing balance the business will not go below, size it from your own fixed calendar rather than a rule of thumb, and write it on the forecast. The floor is fixed for the decision; if the move only passes when the floor is lowered, that is the answer.
Step 3: Enter the move as dated cash lines in its own layer. Every cost on the date it leaves, including the costs that follow a month later. Every receipt on the date it is expected, at your customers' real payment speed, with a probability recorded against any receipt that depends on something that has not happened yet. Enter the receipts at the expected case, not the sponsor's best case.
Step 4: Read the base case with the move in it. Find the lowest closing balance across the horizon and the month it falls in, and check the horizon reaches at least that month. If the trough is inside the horizon and above the floor, the base passes. Note the margin, because the downside will eat into it.
Step 5: Run a downside and read the same two numbers. The FRC's factsheet describes a simple sensitivity: change the most critical assumption. For a growth move, the most critical assumption is almost always the timing of receipts, so slip the move's receipts and the base business's largest customers by a plausible number of days and read the trough again. If it still clears the floor, the move passes the downside. If it does not, the margin in step 4 was borrowed from luck.
Step 6: Date the payback and size the cash tied up until then. From the move's own line, read the most cash it has out and the month its cumulative receipts overtake its cumulative costs. Decide whether the business is willing to hold that much out for that long; there is no correct maximum, only the longer the payback, the higher the risk.
Step 7: Decide, and record the condition. If the move passes both cases, commit it and move its layer into the base, so the next move is tested against a forecast that includes it. If it fails, change the one variable the forecast points at, usually the start date or the size, and re-run steps 3 to 6. Write down the condition the decision rests on, for example the receipt that has to arrive by a date, and the trigger for revisiting it, and check the condition in the weekly cash review.
Ranking Moves When You Cannot Afford All Of Them
Three moves that each pass on their own do not necessarily pass together, because they draw on the same cash in the same months. The professional bodies teach a method for choosing between investments when funds are limited: ACCA's capital rationing ranks divisible projects by a profitability index, the present value of future cash flows divided by the initial investment. That method is built on discounted cash flows against an investment amount, and it answers which combination creates the most value for the funds available. It is not built on a dated cash forecast, and no body publishes a ranking by cash tied up or by the trough. The ranking below is therefore ours.
Rank by two numbers from the test: the cash tied up until payback, smaller and shorter first, and the margin over the floor in the tightest month. In the example that order is the stock build, then the resized marketing programme, then the hire, and it happens to match the order in which their receipts are least dependent on assumptions.
Then sequence. Commit the first move and move it into the base. With the stock build in the base, the resized marketing programme from January now fails the downside in February, at £104,000, because the two moves overlap in the month the base is tightest; started in March it passes. The hire from February on top of the stock build fails February at £107,650; from March it passes, and with all three moves in the forecast the tightest month is January at £112,000, with the hire's own trough in June at about £136,000 on the downside. All three fit. None of them fits in the quarter they were proposed for, and the forecast is what found the sequence in which they do.
What The Forecast Cannot Tell You
The test is a cash test and nothing else. It does not say whether the marketing programme will produce the receipts its sponsor expects, whether the territory is the right one or whether the product line will sell; those are commercial judgements, and the forecast records them as assumptions with dates attached. No body publishes a typical lag between a growth commitment and its cash return for a marketing programme, a stock build, a new territory or a new product, and every timing in the example above is invented for it. The lags in your own forecast should come from your own history where you have it and be labelled as assumptions where you do not.
No body prescribes a maximum payback, a defined surplus window or a growth-capacity measure in cash terms, and the phrases finance teams use for the cash above the floor, headroom, surplus, capacity, are shorthand rather than defined terms. Where a move passes the test only with outside funding, the forecast has done its job by dating the earliest point that funding would be needed, which is what ICAEW's Principle 4 asks for. What the funding should be is outside this page.
How Float Fits
Float is the forecast this test runs on. It connects to Xero or QuickBooks Online, syncs once a day at an hour you set, with a manual sync when you need one, and reads your reconciled bank balances, invoices and bills into a cash forecast you can view week by week over 13 weeks or month by month for longer horizons. The connection is one-way: nothing Float does writes back to your ledger, and the balance it shows is the reconciled ledger balance, not a bank-feed figure.
The base forecast is built from budgets, invoices, bills and reconciled transactions. Each invoice and bill carries an expected payment date you can edit, so a customer who pays at 40 days sits on the forecast at 40 days; for Xero users, Smart Expected Dates can set those dates from your customers' actual payment history. A growth move goes in as a scenario: a budget layer that stacks on the base forecast, holding the move's dated costs and receipts as one-off or repeating budgets, which can be switched on and off, duplicated to try a second start date or a smaller size, and merged into the base when the move is committed. A scenario cannot change your invoices, bills or bank data; it adds budgets on top of them. A hire can be modelled on the People costs tab, with its costs entered as budgets. A cash threshold line shows the date the forecast crosses it under each scenario, which is the trough-against-floor reading in the test above; Float displays that date and does not send alerts. Exports are run by you when you want them rather than delivered on a schedule. If your business runs more than one entity or bank account, Float consolidates them into one position.
Automatic VAT forecasting is available for Xero users; on either platform the VAT payment can be entered as a dated budget. Float does not connect to your bank directly. Sage Intacct is on the waitlist rather than live. See pricing for plans, scenario allowances and entity limits.
Frequently Asked Questions
How do you know if a business can afford to grow?
Enter the growth move into the cash forecast as dated payments and dated receipts, and read the lowest balance it produces against the cash floor you have set. If the base case and a downside case both stay above the floor in every month through to the point where the move has paid for itself, the business can carry the move. The test is about timing rather than totals: the same move can pass in one month and fail in another, depending on what else is leaving the bank while it is still unpaid for.
What should a cash flow forecast show before committing to a growth investment?
Four things: every cost on the date the cash leaves, every receipt on the date it is expected to arrive, the lowest balance the move produces and the month it falls in compared with the floor, and the cash tied up until the move has paid for itself. ICAEW's forecasting principles supply the form for the receipts, documented assumptions with dates and a probability, and for the scenarios, worst, most likely and best case. The forecast should run at least as far as the move's tightest month.
What is the payback period and why does it matter for cash?
ACCA defines the payback period as the time it takes for a project's net cash revenue or savings to pay back the initial investment. It ignores cash flows after the payback point and the time value of money, which is why it is not enough on its own to judge whether an investment is worth making. For the affordability question it is the right measure, because it tells you how long the business is carrying the move's cash and how much cash is out at the peak, and both are read straight off the forecast.
Is there a maximum payback period a business should accept?
No professional body prescribes one. ACCA notes that businesses often set their own target and reject projects that take longer, and describes the choice of target as arbitrary. ACCA's guidance for entrepreneurs makes the practical point instead: the longer an investment takes to pay for itself, the higher the risk. The useful question is not whether the payback is under a fixed number of months but whether the business is willing to hold that much cash out for that long with the floor still cleared.
What is cash headroom?
Headroom is the cash a business has above the balance it has decided not to go below. The Association of Corporate Treasurers uses the term in more than one sense, including the undrawn amount of a borrowing facility and, more generally, any measure of financial flexibility or safety margin, and in its own short-term forecasting example it uses the word for a minimum bank balance. For a business without borrowing facilities, headroom is simply the forecast closing balance minus the cash floor, read in the tightest month rather than the average.
How do you compare growth opportunities when you cannot afford all of them?
Rank them by the cash each one ties up until it pays back, smaller and shorter first, and by the margin over the floor in each one's tightest month. Then commit the first move, move it into the base forecast and test the next move against a forecast that includes it, because moves that pass individually can fail together when their costs overlap in the same month. ACCA's capital rationing method, which ranks projects by a profitability index on discounted cash flows, answers the separate question of which combination creates the most value.
Should a growth move be tested against a downside scenario?
Yes. A growth move is the business's own proposal, and the FRC's factsheet on going concern warns that directors tend to overestimate positive outcomes and underestimate negative ones. Its suggested method is a simple sensitivity, changing the most critical assumption, which for a growth move is usually the timing of receipts. A move that clears the floor in the base case by a small margin and fails the downside is the case the test exists to catch.
How does Float model a growth decision?
As a scenario on the base forecast: a budget layer holding the move's dated costs and receipts, which can be switched on and off, duplicated to try a different start date or size, and merged into the base once the move is committed. The cash threshold line shows the date each scenario crosses the floor, and the closing balance by week or month gives the trough and the payback point. Float displays the threshold date on the forecast rather than sending an alert, and the finance team reads it in the weekly review.
The month a growth move fails on cash is usually visible in the forecast three or four months before it arrives, and so is the start date or the size at which it passes. Start a free 14-day trial of Float and run the move you are deciding on now as a scenario on a live forecast of your own numbers.
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