How To Make a Cash Flow Forecast


Cash flow forecasting can help your business plan for slow periods and make more informed decisions when it comes to your growth. But many business owners don’t know how to create a cash flow forecast or why it’s beneficial for them to do so.

So, how can a cash flow forecast help a business? How do you create a forecast?

Why Is Cash Flow Management Important?

To understand the true cash flow forecast meaning, you have to understand the purpose of a cash flow forecast. A cash flow forecast gives you an idea of how much cash your business will have during a given period, usually weeks or months.

Cash flow forecasting is important because it helps you plan for your expenses. If you don’t have enough cash on hand, you can’t pay your bills and sustain your operations.

Forecasting can help you see whether your business is going to run out of money, and if so, when this will happen. With this valuable knowledge, you can now take steps to prevent cash flow problems, like cutting back on expenses, increasing sales, or investing in growth.

Forecasts play an essential role in your overall cash flow management. It’s the tool that helps you make decisions and gives you a clearer picture of your business’s financial health.

How To Calculate Cash Flow

Calculating your cash flow is easy when you use an online cash flow forecast tool. Online tools automatically pull data from your accounting software to create accurate cash flow forecasts and statements.

But what if you want to do things the old-fashioned way? While the process is a bit more time-consuming, calculating your cash flow isn’t overly complicated. Here’s how the process works:

Decide How Far Out You Want to Plan For

The first step is to determine how far out you want to plan. Do you want to look at your 13 week cash flow, or do you want to plan out years from now?

Deciding how far out you want to plan is crucial. Forecasts typically focus on the near future. Projections are better suited for long-term cash flow planning.

It’s okay if you can’t plan out far ahead. Your business’s cash flow can and should change over time. As things change, you can update your plan.

List All Your Income

For each week or month of your forecasting period, list out all of the income that you have coming in. To keep things organized, create a column for each week or month and a row for each income type.

There’s a good chance that your business has several types of income, whether you realize it or not. Start with the simplest one: your sales. Only count any proceeds that are actually in your bank account. You can use sales figures from previous years to fill out your forecast and adjust as necessary.

Other types of non-sale income include:

·         Grants

·         License fees

·         Royalties

·         Tax refunds

·         Investments from owners or shareholders

Consider all of your income sources carefully, and make sure that you’re thorough.

List All Your Outgoings

Once you know all of your income, you need to calculate all of your outgoings, too. An outgoing is your business’s expenses. Daily, you have expenses that erode your cash flow. You’ll need to gather all of these outgoings.

A few of the most common outgoings include:

·         Credit payments

·         Rent

·         Payroll

·         Loan repayment

·         Marketing

·         Advertising

·         Equipment purchases

·         Inventory purchases

·         Material purchases

·         Taxes

·         Insurance

·         Utilities

·         Etc.

You need to make an extensive list of your outgoings so that you can accurately forecast your cash flow.

If you plan on making projections, you may want to gather this data over a period of one or two years and average the expenses or take the high-end.

All that’s left to do is to subtract your outgoings from your income to understand your cash flow. A negative number means that you’re spending more money than you make.


You can make a cash flow statement manually, but automation is the better option. Software can help you gather financial data automatically, generate cash flow reports in seconds and shed light on the financial health of your business.

If you want your business to grow and prosper, cash flow is the secret.