Skip to main content

There are many facets that go into planning a business. Cash flow is essential for planning optimal times for hiring, renting office spaces, or investing in new equipment. It’s important to have money to fund necessary business expenses without too much money flowing out. Wrestling with cash flow questions like these is important for business owners, especially when the business is growing. Cash flow forecasting helps business owners understand where they stand financially, but not just in the present, but also in the future. It is key to making sound business decisions.

calendar and numbers

Image by ds_30 from Pixabay

What is Cash Flow Forecasting?

Cash flow forecasting looks at how much cash a business is projected to have over a specific time. Looking at your cash flow data includes your current and past income and expenses. Cash flow data helps you with:

  • Identifying when to make capital investments
  • Understanding how regular expenses impact your cash flow
  • Optimizing processes for invoicing and accounts receivable
  • Assessing your business’s busiest and slowest periods

Choose a forecasting period. You can choose a short-term forecast which is usually about 30 days. Medium-term forecasts consider two months to a year. And long-term forecasting looks at one to five years. Please note that longer forecasting periods are less accurate.

Cash Flow Forecast versus Cash Flow Statements

What’s the difference between a cash flow forecast and a statement? The cash flow statement or report contains actual data for previous cash flow (in and out) for your business. The cash flow forecast or projection is an estimate based on the data you’ve collected from your statements and reports.

Purpose of a Cash Flow Forecast

Managing your business often feels like a day-by-day chore. But unless a business establishes working capital, they can’t always achieve strong, sustainable growth. You will not be able to make well-informed decisions or plans to meet your business objectives unless you gain a strong understanding of your financials. What if you need to add a position such as an administrative assistant so you can focus more on serving clients? Your bank account may be okay for right now and you have the cash to pay an extra salary this month. No problem, right? But can you predict if you’ll have the cash levels to pay an assistant next month? What about over the next three or four months?

So, the real question is if your business has the cash flow to support ongoing expenses like hiring new employees. This is where cash flow forecasting is useful. When you understand the big picture of your cash flow and know what you have coming in and going out on a regular basis, you can better discern feasible expenses for your business both now and in the future.

How is Cash Flow Calculated?

The key to calculating your cash flow is nailing down all the cash you have coming in and going out. Some examples include:

Cash Inflow

  • Paid in full invoices
  • Business loans
  • Income from rental property
  • Government grants
  • Sales of assets

Cash Outflow

  • Regular expenses and payments (subscriptions, business cell phones, rent, travel, utilities)
  • Payments on business loans
  • Equipment lease or purchase
  • Employee salaries
  • Tax payments

Wonder where you can find all this information quickly? Take a look at your financial reports. You’ll find all the numbers you need there.

What Cash Flow Reports do You Need?

There are two reports you’ll need for cash flow forecasting. Your Profit & Loss Report and Cash Flow Report are key to helping you pinpoint your earning and spending patterns. They help you create a cash flow statement that can help you in your decision-making process.

Profit & Loss Report/Statement

Your Profit & Loss report is your biggest asset when you want to calculate and forecast your business’ cash flow. If you use cloud accounting software, you likely already enter paid invoices and expenses. That gives you your figures with just a quick click of a button. It will have your gross profit, expenses, and total net profit all in one place.

  • Gross profit: Your gross profit is all your net income minus the cost of goods sold (COGS).
  • Expenses: Your expenses include all your bill payments and outgoing money.

When you subtract your total expenses from your gross profit, you’ll have your net profit. Net profit is how much you earned or lost after your expenses.

Cash Flow Report/Cash Flow Statement

A cash flow report gives you a quick snapshot of how much cash you have on hand, and how much money has been entering and leaving the business. The report breaks it all down for you in several sections.

  • Starting balance: The total cash you had at the beginning of the reporting period. It’s the sum of your gross cash inflow and gross cash outflow.
  • Net Cash Change: Your gross cash inflow minus the Gross Cash outflow
  • Ending Balance: Your starting balance plus your net cash change

The ending balance is your net cash flow for the period you are assessing. Once you have done these calculations, look for patterns in your cash flow both in and out. This helps you project cash flow and improve your future cash flow as well.

How do I do my Cash Flow Forecast?

Taking a good look at your P&L provides you with insights into your earning and spending. Be realistic. Take this opportunity to correct any patterns you find troubling or inconsistent. For example, if you notice a negative cash flow in the third quarter for the last three years, you can expect it to be the same this year too. However, once you see this pattern, you can make changes to correct it. Here is an example forecasting process.

Cash Flow Forecasting in Four Steps

Step 1: Choose a period of time for forecasting.

Step 2: Review your cash sources over the last one or two years. Then ask yourself these questions about your forecasting period:

  • Will my client base remain the same? Can I expect to work with the same clients in the future?
  • Will I need to obtain business loans, sell assets, apply for government grants, or bring in investment income?
  • Do I foresee signing long-term contracts with large clients?

Use your cash inflows from earlier years to estimate increases or decreases in your cash receipts.

Step 3: Review your cash outflow over the last year (or two). Ask yourself these questions:

  • Do I expect my regular expenses to stay the same?
  • Will I purchase assets or pay off any loans?
  • Do I expect any other one-time expenses?

You can use your previous operating costs to estimate next year’s cash outflow.

Step 4: Take another look at your cash flow report to see how much cash you have on hand right now. Add all the cash inflows and deduct your outflows for the coming year. This provides you with the closing cash balance for the end of the year. It also is your opening cash balance for the next year.

Cash Flow Forecasting Can Supercharge Your Business

Investing in your company’s financials helps you make smart decisions for your future. You will know more what to expect and tweak behaviors based on your insights. Forecasting helps when you run into problems. Even rapid growth can disrupt your cash flow. Well-documents cash flow forecasts can help you make decisions such as expanding your business space or purchasing new equipment. You’ll know where to put these types of expenses on your business calendar.

xosotin chelseathông tin chuyển nhượngcâu lạc bộ bóng đá arsenalbóng đá atalantabundesligacầu thủ haalandUEFAevertonxosofutebol ao vivofutemaxmulticanaisonbethttps://bsport.fithttps://onbet88.ooohttps://i9bet.bizhttps://hi88.ooohttps://okvip.athttps://f8bet.athttps://fb88.cashhttps://vn88.cashhttps://shbet.atbóng đá world cupbóng đá inter milantin juventusbenzemala ligaclb leicester cityMUman citymessi lionelsalahnapolineymarpsgronaldoserie atottenhamvalenciaAS ROMALeverkusenac milanmbappenapolinewcastleaston villaliverpoolfa cupreal madridpremier leagueAjaxbao bong da247EPLbarcelonabournemouthaff cupasean footballbên lề sân cỏbáo bóng đá mớibóng đá cúp thế giớitin bóng đá ViệtUEFAbáo bóng đá việt namHuyền thoại bóng đágiải ngoại hạng anhSeagametap chi bong da the gioitin bong da lutrận đấu hôm nayviệt nam bóng đátin nong bong daBóng đá nữthể thao 7m24h bóng đábóng đá hôm naythe thao ngoai hang anhtin nhanh bóng đáphòng thay đồ bóng đábóng đá phủikèo nhà cái onbetbóng đá lu 2thông tin phòng thay đồthe thao vuaapp đánh lô đềdudoanxosoxổ số giải đặc biệthôm nay xổ sốkèo đẹp hôm nayketquaxosokq xskqxsmnsoi cầu ba miềnsoi cau thong kesxkt hôm naythế giới xổ sốxổ số 24hxo.soxoso3mienxo so ba mienxoso dac bietxosodientoanxổ số dự đoánvé số chiều xổxoso ket quaxosokienthietxoso kq hôm nayxoso ktxổ số megaxổ số mới nhất hôm nayxoso truc tiepxoso ViệtSX3MIENxs dự đoánxs mien bac hom nayxs miên namxsmientrungxsmn thu 7con số may mắn hôm nayKQXS 3 miền Bắc Trung Nam Nhanhdự đoán xổ số 3 miềndò vé sốdu doan xo so hom nayket qua xo xoket qua xo so.vntrúng thưởng xo sokq xoso trực tiếpket qua xskqxs 247số miền nams0x0 mienbacxosobamien hôm naysố đẹp hôm naysố đẹp trực tuyếnnuôi số đẹpxo so hom quaxoso ketquaxstruc tiep hom nayxổ số kiến thiết trực tiếpxổ số kq hôm nayso xo kq trực tuyenkết quả xổ số miền bắc trực tiếpxo so miền namxổ số miền nam trực tiếptrực tiếp xổ số hôm nayket wa xsKQ XOSOxoso onlinexo so truc tiep hom nayxsttso mien bac trong ngàyKQXS3Msố so mien bacdu doan xo so onlinedu doan cau loxổ số kenokqxs vnKQXOSOKQXS hôm naytrực tiếp kết quả xổ số ba miềncap lo dep nhat hom naysoi cầu chuẩn hôm nayso ket qua xo soXem kết quả xổ số nhanh nhấtSX3MIENXSMB chủ nhậtKQXSMNkết quả mở giải trực tuyếnGiờ vàng chốt số OnlineĐánh Đề Con Gìdò số miền namdò vé số hôm nayso mo so debach thủ lô đẹp nhất hôm naycầu đề hôm naykết quả xổ số kiến thiết toàn quốccau dep 88xsmb rong bach kimket qua xs 2023dự đoán xổ số hàng ngàyBạch thủ đề miền BắcSoi Cầu MB thần tàisoi cau vip 247soi cầu tốtsoi cầu miễn phísoi cau mb vipxsmb hom nayxs vietlottxsmn hôm naycầu lô đẹpthống kê lô kép xổ số miền Bắcquay thử xsmnxổ số thần tàiQuay thử XSMTxổ số chiều nayxo so mien nam hom nayweb đánh lô đề trực tuyến uy tínKQXS hôm nayxsmb ngày hôm nayXSMT chủ nhậtxổ số Power 6/55KQXS A trúng roycao thủ chốt sốbảng xổ số đặc biệtsoi cầu 247 vipsoi cầu wap 666Soi cầu miễn phí 888 VIPSoi Cau Chuan MBđộc thủ desố miền bắcthần tài cho sốKết quả xổ số thần tàiXem trực tiếp xổ sốXIN SỐ THẦN TÀI THỔ ĐỊACầu lô số đẹplô đẹp vip 24hsoi cầu miễn phí 888xổ số kiến thiết chiều nayXSMN thứ 7 hàng tuầnKết quả Xổ số Hồ Chí Minhnhà cái xổ số Việt NamXổ Số Đại PhátXổ số mới nhất Hôm Nayso xo mb hom nayxxmb88quay thu mbXo so Minh ChinhXS Minh Ngọc trực tiếp hôm nayXSMN 88XSTDxs than taixổ số UY TIN NHẤTxs vietlott 88SOI CẦU SIÊU CHUẨNSoiCauVietlô đẹp hôm nay vipket qua so xo hom naykqxsmb 30 ngàydự đoán xổ số 3 miềnSoi cầu 3 càng chuẩn xácbạch thủ lônuoi lo chuanbắt lô chuẩn theo ngàykq xo-solô 3 càngnuôi lô đề siêu vipcầu Lô Xiên XSMBđề về bao nhiêuSoi cầu x3xổ số kiến thiết ngày hôm nayquay thử xsmttruc tiep kết quả sxmntrực tiếp miền bắckết quả xổ số chấm vnbảng xs đặc biệt năm 2023soi cau xsmbxổ số hà nội hôm naysxmtxsmt hôm nayxs truc tiep mbketqua xo so onlinekqxs onlinexo số hôm nayXS3MTin xs hôm nayxsmn thu2XSMN hom nayxổ số miền bắc trực tiếp hôm naySO XOxsmbsxmn hôm nay188betlink188 xo sosoi cầu vip 88lô tô việtsoi lô việtXS247xs ba miềnchốt lô đẹp nhất hôm naychốt số xsmbCHƠI LÔ TÔsoi cau mn hom naychốt lô chuẩndu doan sxmtdự đoán xổ số onlinerồng bạch kim chốt 3 càng miễn phí hôm naythống kê lô gan miền bắcdàn đề lôCầu Kèo Đặc Biệtchốt cầu may mắnkết quả xổ số miền bắc hômSoi cầu vàng 777thẻ bài onlinedu doan mn 888soi cầu miền nam vipsoi cầu mt vipdàn de hôm nay7 cao thủ chốt sốsoi cau mien phi 7777 cao thủ chốt số nức tiếng3 càng miền bắcrồng bạch kim 777dàn de bất bạion newsddxsmn188betw88w88789bettf88sin88suvipsunwintf88five8812betsv88vn88Top 10 nhà cái uy tínsky88iwinlucky88nhacaisin88oxbetm88vn88w88789betiwinf8betrio66rio66lucky88oxbetvn88188bet789betMay-88five88one88sin88bk88xbetoxbetMU88188BETSV88RIO66ONBET88188betM88M88SV88Jun-68Jun-88one88iwinv9betw388OXBETw388w388onbetonbetonbetonbet88onbet88onbet88onbet88onbetonbetonbetonbetqh88mu88Nhà cái uy tínpog79vp777vp777vipbetvipbetuk88uk88typhu88typhu88tk88tk88sm66sm66me88me888live8live8livesm66me88win798livesm66me88win79pog79pog79vp777vp777uk88uk88tk88tk88luck8luck8kingbet86kingbet86k188k188hr99hr99123b8xbetvnvipbetsv66zbettaisunwin-vntyphu88vn138vwinvwinvi68ee881xbetrio66zbetvn138i9betvipfi88clubcf68onbet88ee88typhu88onbetonbetkhuyenmai12bet-moblie12betmoblietaimienphi247vi68clupcf68clupvipbeti9betqh88onb123onbefsoi cầunổ hũbắn cáđá gàđá gàgame bàicasinosoi cầuxóc đĩagame bàigiải mã giấc mơbầu cuaslot gamecasinonổ hủdàn đềBắn cácasinodàn đềnổ hũtài xỉuslot gamecasinobắn cáđá gàgame bàithể thaogame bàisoi cầukqsssoi cầucờ tướngbắn cágame bàixóc đĩaAG百家乐AG百家乐AG真人AG真人爱游戏华体会华体会im体育kok体育开云体育开云体育开云体育乐鱼体育乐鱼体育欧宝体育ob体育亚博体育亚博体育亚博体育亚博体育亚博体育亚博体育开云体育开云体育棋牌棋牌沙巴体育买球平台新葡京娱乐开云体育mu88qh88