Cash Flow Forecasting

Nowadays, one important element of a successful business is taking some time to sit back, think and plan carefully on your finances.

A cash flow forecast is a simple business tool which is the most important way of handling your finances.

BONUS: Click here to download your FREE copy of our Ready, Set Business! Guide that shows you step by step how to start your own profitable business.

Through your projections in the cash flow forecast, you will be able to determine if your expected cash inflows (ie income) will cover your expected cash outflows (ie expenses).

Download Your Guide Aside from that, it will help you:

  • foresee and evaluate major expenses in the future
  • determine when cash is available
  • plan and prepare for development, expansion, inventory control and taxes

There are available software packages that can generate a report for your cash flow forecast. You can also do it manually. Here is a simple step by step process that you may follow.

Step 1 – Cash flow forecast creation

In your spreadsheet, create a table with your preferred length of time and periods of that time, as your columns. Use proper headings for each column. For example, the report may show monthly amounts for the next one or two years.

Name the first column ‘Cash Movement’ and across the top of the table enter the months of the year as the next column headings, like this:

Cash movement January February March


Insert a heading entitled ‘Income’ in the first column and below that heading detail each source of income.  At the bottom, add a row for the subtotal.

After that, enter a heading with a title ‘Expenses’ and also add a row at the bottom of this group for its subtotal.

Then, insert a row which shows the amount for income subtotal minus the expenses subtotal for the month.

Lastly, enter a row for your running total.  In this row, add your previous running total with your profit or loss for the period (monthly total) to show your financial position at the end of the period.

Your table should display like this:

Cash movement January February March
Sales of A
Sales of B
Monthly total
Running total

Step 2 – Data Input

In the table, insert your actual income and expenses amount using your actual accounting records. For the coming months, use projected amounts. However, you should only forecast amounts which are realistic and practical based on the current trend of your business operations. Do not underestimate expense and do not overestimate income.

When you’ve already inputted your data, it would be easier for you to see cash inflows and outflows on your business.

Cash movement January February March
Sales of A 20,000 15,000 13,000
Sales of B 10,000 10,000 15,000
Subtotal 30,000 25,000 28,000
Rent 2,000 2,000 2,000
Telephone 1,000 700 800
Stationery 500 300 500
Advertising 1,000
Subtotal 3,500 3,000 4,300
Monthly total 26,500 22,000 23,700
Running total 26,500 48,500 72,200


Your cash flow forecast can also help you in making a decision on your budget. For instance, since you will be able to know if there are any increases in bills payment or in rent expenses, through this business tool, you can plan ahead and make sure there are enough funds to pay for these costs.

Using your cash flow forecast will enable you to determine if you have enough finances to invest in equipment, pay for employees’ training, and spend on promotional activities.

Step 3 – Regular Update

You have to regularly update your cash flow forecast after creating it. You have to visit it say, monthly to ensure that you are on the right track in terms of your cash. Preferably, you would want to control your finances and if there are any gaps that need to be addressed, make action immediately so that you have enough cash to cover your expenses.

Advantages of cash flow forecast

You will be provided with the information that you need to successfully control your finances through a cash flow forecast.

Through this business tool, you will be able to analyse and understand the areas where you need to cut spending as well as draw attention to opportunities for investing the little extra cash.

Moreover, you will worry less about your business as you will not be anxious on how to pay for your expenses and how to cope up when you run out of cash. By a simple cash flow forecast, you will be able to focus and enjoy more your business!

Next Step

  • Create a cash flow forecast.
  • Input financial data as much as you can.
  • Remind yourself to review

And don’t forget to grab your FREE copy of our Ready, Set Business! Guide that shows you step by step how to start your own profitable business. Get it here….

NOTE: This month we’re holding a limited number of Free Business Strategy Sessions designed to show business owners how they can manage and grow their enterprises with the least amount of cost and disruption possible.

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James HuyVuong is a CPA and the owner of Your Accounting Partners. Partnering with businesses from start to scale thru to sale.

Posted on 15/03/2017 in Accounting Services

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About the Author

James Huy Vuong the Founder of Your Accounting Partners, a Brisbane based Business support agency. Specialising in providing bookkeeping, accounting, tax and compliance, business valuation and business sales services to local small business owners. His passion for business was evident very early on at the start of his career in accounting. He embarked on an unconventional path away from the traditional position with one of the big 4 accounting firms like most aspiring young graduate in his field. He decided instead through the lure a more diverse role, more pay and a much cooler title to work with Australia largest telco as a Business Specialist. He entered the world of business management and ownership in the hospitality industry for the invaluable hands-on experience one could not get just by reading textbooks, understanding debits and credits and passing exams. Huy has also spent a good part of a decade in the financial services industry owning and managing his family business which has lead him to start Your Accounting Partners. Your Accounting Partners sets out to help time-poor, frustrated business owners do better business by partnering with business owners on their ownership journey and making it together. Your Accounting Partners specialises in hospitality, service-base & professional services businesses. His mission is to help business owners use their business to give back to the family what it takes out. When it comes to business we say "You focus on what you do best, partnering with us and we'll take care of the rest".
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