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A Guide on How to Prepare a Cash Flow Forecast

Preparing a cash flow forecast can be daunting if you're an entrepreneur or founder. But it's actually quite simple, and once you get the hang of it, it'll be one of your most valuable insights into your business.

What Is a Cash Flow Forecast?

Your cash flow forecast is a snapshot of how much your business will cost you to run for a certain period. It answers questions such as:

  • How much are you able to spend on running the business?

  • How much in cash does your business need to operate?

  • Are there any surprises coming up that will affect your cash flow?

Once you know how much it will cost to run your business, you can better plan for unexpected costs, such as start-up costs, growth, and so on.

Why Is a Cash Flow Forecast Important?

Cash flow planning is essential: knowing how much money you have available will help you see when you might run out of money. This will help you decide what to do to improve your situation. perhaps you'll find that you need to reduce expenses, find new investments, or increase sales.

You're on the upswing, with plans to expand into new markets, invest in new products, and take on bigger premises. Accurate cash flow projections will help you see if now is the time to take the plunge.

What Are the Steps to Prepare a Cash Flow Forecast?

Preparing a cash flow forecast is a bit complex, but it doesn't have to be. There are many different ways to forecast your finances. You can use free online software or follow the four steps below to build your own budget.

1. Decide How Far Out You Want to Plan for

Finances can take a long time to plan. Try to predict as far ahead as you can. If you have a reliable sales pipeline and data from past years, that will help. If you are a new business, you might not have as much data - so your predictions will be less accurate the further you go. Don't worry too much if you can't plan far ahead. Your finances will change over time. That's how they should. You can update your plan as things change or get more precise estimates.

2. Make a List of All Your Income

List each type of income in a column, and list when you expect to receive that money in a row. For example, if you expect to receive a salary in the first week of the month, list Salary in the first row and 1st week of the month in the column. If you expect a bank deposit to arrive on the fifteenth of the month, list Bank Deposit in the first row and 15th of the month in the column.

3. Make a List of All Your Outgoings

For each week or month, make a budgeted spending list. Include everything you'll be spending, such as rent, salaries, raw materials, assets, bank loans, charges, marketing and advertising spend, and tax bills. Once you have a list of expenses, add the totals for each column to get your total outgoings.

4. Work Out Your Running Cash Flow

To calculate your cash flow, subtract your incoming cash from your outgoing cash each week or month. This will tell you whether you're generating cash (you're spending less than you're earning) or losing cash (spending more than you're making).


Building your cash flow forecast can help you prepare for any changes your business may face. Your cash flow forecast can predict any short-term surprises and can add a level of precision to your business planning and growth strategy.

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