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Our 6-Step Guide To Forecasting Your Business Cash Flow

A cash flow forecast is a way to plan and analyse the financial health of your business. It involves looking at your income and expenditure over a certain period and estimating your future cash balance.

Your cash balance may be positive or negative depending on the money coming in and going out. Cash flow forecasting provides you with the insight you need to make informed decisions and plan for the future of your business.

If you expect to experience a cash flow shortage, it's essential to take steps to prevent it. This could involve negotiating more favourable payment terms with vendors and increasing sales.

If you’ve never done this before, consider hiring an accountant for online businesses. This way, you can ensure that you get the most accurate cash flow forecasting for your business.

What Happens If You Fail to Forecast Your Business Cash Flow?

Failing to forecast your business cash flow can have severe consequences for your business. Without accurate cash flow projections, you may be unable to pay bills, make necessary investments, and keep up with the competition. You also won't be able to make informed decisions about allocating your resources or planning for the future.

Knowledge is always power when it comes to business. The more you know about your financial status, the better you can handle potential issues and plan for your company's future. Follow these six steps to forecast your business cash flow correctly:

1. Gather the Necessary Financial Information

If you have one, get your accountant to gather all the financial statements, such as the balance sheet, income statement, and cash flow statement, for the past few years. This will help you better understand the company's cash flow and provide a good starting point for forecasting.

2. Identify Key Drivers of Cash Flow

Identify the different factors that have the most significant impact on the company's cash flow. These drivers could include sales, expenses, investments, and other activities.

3. Analyse Historical Trends

Preferably with a small business accountant by your side, look at the historical trends of the key cash flow drivers and use the data to make assumptions about future trends. Consider factors such as seasonality, economic conditions, industry trends, and company business model changes.

4. Project Future Cash Flow

When creating a projection of a company's future cash flow, it is essential to consider all of the assumptions made in the previous step. This includes the company's sales, expenses, and capital expenditures. It also includes changes in the macroeconomic environment, such as changes in interest rates or inflation.

Once the assumptions have been made, you can use spreadsheet software to project the company's future cash flow. You can create a cash flow statement that lists each month's cash inflows and outflows. The cash inflows and outflows should be based on the assumptions made in the previous step.

The cash flow projection should also include other cash flows such as debt payments, dividend payments, or other investments. This will provide a more accurate picture of the company's future cash flow.

5. Create a Contingency Plan

Create a contingency plan for unexpected changes in the assumptions you made in step 3. This should include a plan for how the company will adjust its cash flow if the assumptions are not met.

6. Monitor Cash Flow

Monitor the company's cash flow regularly and adjust the forecast as needed. This will help ensure that the company's cash flow is on track and that the company is prepared for any changes in the market.


Your cash flow forecast should be updated regularly, as your business's financial situation can change quickly. By staying on top of your cash flow forecast, you can always have enough cash to cover your expenses and take advantage of new opportunities. For more accurate forecasts, consider hiring a small business accountant for help.

Do you need an accountant for your online business? The ECommerce Accountant can help by keeping you compliant with regulations, increasing your profit, forecasting cash flow, and more. Contact us today to get started.

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