The IR591 cash flow forecast: how to build one IRD will believe

A cash flow forecast is the clearest way to show IRD that a payment plan will work. It turns “we’ll pay what we can” into specific numbers, month by month. IRD’s own template for this is the IR591, a twelve-month forecast that companies, partnerships and trusts can upload with an application for relief or instalment support (IRD).

It’s described as optional. Practitioners say IRD increasingly expects forecasts and evidence that a business can both make its instalments and keep up with new tax (McIsaacs, secondary). So treat it as essential. If you’re applying for a payment plan, read our guide to instalment arrangements alongside this page, and if IRD has already said no once, see payment plan declined.

What does a cash flow forecast actually show?

Money in and money out, for each of the next 12 months, and the bank balance at the end of each month. It isn’t a profit forecast. It deals with when cash actually moves, which is what matters for paying IRD.

A useful layout:

Line	What to include
Opening bank balance	The actual balance at the start of the month
Receipts	Customer payments, by when you expect them to arrive (not when invoiced)
Wages and drawings	Net pay, plus anything owners take out
Operating costs	Rent, stock, materials, fuel, utilities, insurance, subscriptions
New tax	GST, PAYE and KiwiSaver deductions, provisional tax, as they fall due
Other debt repayments	Vehicle finance, equipment loans, any business loan
Proposed IRD instalments	The amounts and frequency you’re asking for
Closing balance	Opening plus receipts minus payments

If the closing balance goes negative in any month, the plan doesn’t work as it stands.

What are the most common mistakes?

1. Forgetting new tax. The forecast covers the old debt but not next month’s GST and PAYE. IRD will spot this immediately.
2. Counting invoices instead of receipts. If customers pay in 45 days, show the money arriving in 45 days.
3. Using your best months as normal. A December peak isn’t a template for June.
4. Leaving out owner drawings. You still need to live. Show a realistic figure.
5. No explanation. A forecast with no notes forces IRD to guess your assumptions.
6. Instalments that leave no buffer. One late customer and the plan breaks.

How do you make it credible?

• Base it on real history. Use the last 6 to 12 months of bank statements as your starting point.
• Show seasonality. If winter is quiet, show it, and set instalments that winter can carry.
• Write short notes. “Receipts based on average of last six months, reduced 10% for June to August” tells IRD you’ve thought about it.
• Include a contingency. A small monthly buffer line shows realism.
• Show what’s changed. If you’ve cut a cost, won a contract or raised prices, show it and note it.
• Get your accountant to review it. A forecast reviewed by a chartered accountant carries more weight.

Forecast doesn’t balance? A loan to clear part of the debt can make the rest of the plan work. Ask us, with no credit check to enquire.

What if the forecast shows you can’t afford a plan?

That’s important information, and it’s better to find it on paper than after a missed instalment. You have three broad options:

1. Reduce the debt first. Use savings, sell an asset, or borrow to clear part of it, then propose a smaller, shorter arrangement.
2. Clear it in full with funding, so there’s no IRD plan to keep, only a loan with a known term.
3. Revisit the business. If even a reduced plan doesn’t work, the business may need changes, or advice about whether it can continue.

If you’re using a loan, put it in the forecast: show the loan proceeds, the payment to IRD, and the new loan repayments. IRD’s relief form asks companies whether they’ve tried getting a loan to pay the debt, so showing a worked-through funding option answers that question with numbers. Our arrangement vs loan cost check helps you work out the dollar difference before you commit.

An illustrative example

Illustrative only. Not a real client and not an offer.

A Taranaki engineering firm owes IRD $92,000. Its first forecast proposed $8,000 a month and ran out of cash in July, when two big clients traditionally pay late. A revised version uses a cash-flow loan to clear $55,000, includes the loan repayments, and proposes $4,000 a month for the remaining $37,000. Every month stays positive, with a $6,000 buffer in the leanest month. IRD agrees to the plan.

What should go with the forecast?

Along with the IR591, IRD may ask for or find helpful:

• the latest financial statements or management accounts;
• a list of assets and liabilities;
• the shareholder current account position;
• a short explanation of how the debt arose and what’s changed; and
• evidence of any funding you’ve applied for.

How do you keep the forecast useful after it’s accepted?

Update it monthly with actual figures. If reality drifts below the forecast, you’ll see it early and can talk to IRD before an instalment is missed. That early conversation is far easier than explaining a default. See what happens if an arrangement breaks.

Let funding make the numbers work

If your forecast won’t stretch to the plan IRD wants, send us a quick enquiry. It doesn’t involve a credit check, your details aren’t sent on to other lenders, and a real person will look at whether a loan could clear part or all of the debt. Share accurate figures, including your monthly receipts and the amount owed, so we can tell you what’s realistic.