How To Do A Cash Flow Forecast

How To Do A Cash Flow Forecast

A weekly cash flow forecast is one of the most important tasks you can do in your business. Lots of businesses have failed because of poor cash flow forecasting. Whilst it’s true that most cash flow problems are actually profit problems, a cash shortage has a way of getting your attention – you can’t keep putting it off.

I think it’s critical that you do a cash flow estimate weekly rather than monthly. Too much can happen in a month, weekly forecasts are more granular and accurate. First thing Monday is a great time to do it. Hopefully it will give you peace of mind each week, if not you will need to take action of some kind.

Don’t try to forecast too far into the future for your operational cash flow, anything past 13 weeks is more strategy than operations and should be done separately. 13 weeks can fit on one page so you can see it all at once.

Don’t make the mistake of adding lots of small expenses but only one line for income. Turn that upside down and put more emphasis on receipts, group small expenses into fewer lines. Again try to fit it all on one page.

Go through your debtors one by one and split out at least twenty of the biggest debtors and put the estimated amounts and receipt date for each invoice for these debtors in your forecast.

Use discounted pipeline to calculate receipts for the smaller debtors (if you have a lot of debtors). Also, use your pipeline (you should have a pipeline report) to calculate less immediate weeks – budget isn’t good enough because it will always predict exactly the budget, that’s not very useful. So, in essence, make sure you focus on the large and the variable and not the small and fixed.

Remove the first column each week and add a new one to the end. Make sure you adjust your assumptions over time based on actual results.

Good cash flows get more and more accurate over time, the most important thing to do, like most things in life, is to start.

Give me a shout if you would like a template.


Photo by Wyron A on Unsplash