Cash flow forecast template

Click here to get your free cash flow forecast template.

What is a cash flow forecast?

A cash flow forecast is a financial tool that predicts a business's cash inflows and outflows over a specific time period. It helps plan for expenses, identify potential cash shortages and make informed financial decisions. Regularly updating and checking your cash flow forecast can ensure accuracy and effective financial management for your business.

What is the cash flow forecast formula?

Cash flow forecast = business starting cash balance + projected cash inflows – projected cash outflows

Why is a cash flow forecast important?

A cash flow forecast is important for several reasons:

• It allows your businesses to plan your finances effectively by anticipating when and how much money will come in and go out. This enables you to allocate resources wisely and avoid cash shortages.

• By predicting future cash flows, you can identify potential cash shortfalls in advance. This helps to take proactive measures, such as securing a business loan.

• Cash flow forecasts help in making informed business decisions, such as investment opportunities, expansion plans, and large purchases. It ensures that decisions align with the available cash resources.

• For businesses with business loans or debts, cash flow forecasts assist in managing repayments and avoiding default. It shows whether the business can meet its financial obligations on time.

• If you’re considering applying for a business loan, lenders often use cash flow forecasts to evaluate the financial health and stability of businesses before making a decision. 

How to do a cash flow forecast

To create an accurate cash flow forecast, it’s best to provide realistic, rather than ambitious, projections of your business’ sales, revenue and cash inflows. 
Decide on a time period you want to forecast your cash flow for, a popular option is a cash flow forecast of 12 months, broken down into monthly periods. 
Once you download the free cash flow forecast template, you can start to create your cash flow forecast. 

1. Start by entering your projected sales revenue for each period. If you have multiple product lines or sources of income, break them down accordingly.

2. Ensure to add any additional sources of cash inflows such as investments. 

3. Next, you will need to enter your anticipated operating expenses for each period, such as rent, utilities, salaries, marketing costs, etc.

4. Include expenses like loan repayments, taxes, one-time expenses, and any other significant outflows.

Once you have created your cash flow forecast, review and analyse the data so that you can effectively plan for the 12 month period. 
Make sure to regularly update your cash flow forecast as you progress through the year. This will help to keep your projections accurate as you update any changing circumstances. You can also compare your projections to your actual cashflows each month.