Cash Flow Forecasting

Forecasting the Impact of a Financial Decision

When will cash be coming your way?

© iStockphoto/mgkaya

As individuals, we can often "muddle through" if we run out of cash in a month – we quickly arrange a bank loan or overdraft, or put purchases on a credit card.

Businesses often struggle to do the same, partly because the amounts of money involved are usually much larger, and partly because it's often difficult to raise a lot of money quickly.

Cash is the lifeblood of most businesses.

It's the money that you have easy access to, and that you use to pay staff, tax authorities, and suppliers.

If your business doesn't have enough cash to pay these people, it may fail within only a few days.

To keep your business healthy, you need to understand how much cash will be coming into it, and ensure that your outgoings are comfortably lower than these cash incomings. Cash flow forecasts (also known as projections) help you do this. They help you make informed decisions about the future of your business, and proactively arrange finance, where this is necessary.

In this article, we'll look at how to forecast cash flows using a spreadsheet.


This article is intended to help non-financial managers understand cash flow forecasts. Where you are relying on cash flow forecasts for business purposes, ensure that they are prepared by appropriately qualified finance professionals.

About the Tool

Cash moves in and out of a business in three ways:

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