Cash Flow Forecast


About Cash Flow Forecasting

Cash flow is the life-blood of all businesses—particularly start-ups and small enterprises.

It is essential that you predict what is going to happen to cash flow to make sure that your business can afford to pay suppliers and employees. Suppliers who don’t get paid will soon stop supplying; it is even worse if employees are not paid on time. Think of the cash flow forecast as an “early warning system”. Spot problems with customer payments—preparing the forecast encourages you to look at how quickly customers are paying you.

Lenders (banks, credit unions and CFDCs) require a cash flow forecast before they can approve a small business loan. It’s also common that you will be asked to provide cash flow forecasts at regular intervals until your loan is paid in full.

A cash flow forecast indicates the likely future movement of cash in and out of the business. It’s an estimate of the amount of money you expect to flow in (receipts) and out (payments) of your business and includes all your projected income and expenses.

  • Add cash inflows you expect to collect each month for the next 12 months. This includes customer payments, loans, grants, rental income etc… Keep in mind your customer payment terms – cash or credit (30, 60, 90 days or longer).
  • Add cash outflows from the items listed in your expenses forecast including supplier payments, salaries, rent, credit card payments, and taxes. You also need to include your loan repayments. Consider irregular and seasonal payments such as repairs and maintenance as required, and inventory purchases.
  • Add in an opening bank account balance, and add the revenue less the expenses for each monthly period to find out your likely cash position.

For more help with cash flow, download a free guide from the BDC: