What is a Cash Flow Forecast?

A cash flow forecast is an estimate of the future inflows and outflows (receipts and payments) of cash for a business. It is typically used to assess whether a business has sufficient cash to meet its short-term obligations and to anticipate when it will need to raise additional funds.

A cash flow forecast can be prepared using either accounting or transaction data. Accounting data reflect the historical financial performance of a business, while transaction data capture actual receipts and payments as they occur.

How to Create a Cash Flow Forecast.

Creating a cash flow forecast is not as difficult as it may sound. The first step is gathering all your financial information, including your income, expenses, and other sources or uses of cash. Once you have this information, you can begin creating your forecast.

You can use several methods to create your cash flow forecast. The most important thing is to choose a method that works best for you and your business. Some common methods include using Excel or another spreadsheet program, creating a budget, or using software specifically designed for cash flow forecasting.

Once you have chosen a method, you must input your financial data into the format. This data will be used to generate your forecasts. After inputting your data, you can generate various reports showing how much cash you expect to come in and go out over time.

These reports can be used to help you make decisions about how to manage your cash flow best. For example, if you see that there is likely to be a shortfall in one month, you may decide to cut back on expenses or bring in additional income during that month; alternatively, if you see that there will be a surplus.

What to do With Your Cash Flow Forecast.

Once you have your cash flow forecast, you can use it to make informed decisions about your business. Here are some things you can do with your cash flow forecast:

Use it to create a budget: Your cash flow forecast can help create a budget for your business. By knowing how much money you expect to come in and go out, you can better allocate your resources.

Make financial projections: A cash flow forecast can also be used to make financial projections for your business. This can help you plan for future expenses and income.

Get a loan: If you need a loan for your business, a cash flow forecast can help demonstrate your ability to repay the loan. This can increase your chances of getting approved for financing.

Invest in growth: Use your cash flow forecast to identify opportunities for investing in growth. This could include expanding your product line or opening new locations.


A cash flow forecast is a crucial tool for any business, large or small. It can help you to anticipate and plan for shortfalls in your cash flow, as well as help you to make the most of any surplus funds.

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