How to Prepare a Cash Flow Forecast

Successful cash flow forecasting requires that you understand how cash flows through your business and that profit is not the same as cash. You’ll need to identify the sources of cash for your business including items such as cash sales, customer deposits, and accounts receivable collections, as well as uses of cash like costs of goods sold, finance expense, and payroll taxes and benefits.

Cash flow forecasting, at its highest level, starts with beginning cash on hand, adds all sources of cash coming into the business, and deducts all uses of cash that are going out of the business. This yields your forecasted cash balance. My video, How to Prepare a Cash Flow Forecast, shows you how to structure the forecast and what to include.

Many businesses don’t do cash flow forecasting, but it can help you protect the cash you have on hand. And, by developing an operating budget – or what I like to call a profit plan – the process of cash flow forecasting is a lot simpler.

I’m always asked how often cash flow should be forecasted. That varies with the business. But with the unpredictable nature of our current business climate and the fact that many businesses are struggling to have enough cash, I recommend forecasting for the near term – a period of about six weeks.

Once you start to do forecasting, it will become an invaluable tool you won’t want to do without. Contact me if I can be of help in getting your cash flow forecast started or for a complimentary review of your particular financial situation.


Written by

Rick Arthur is a CFO whose expertise is built on Financial Intelligence and 35 years in senior financial roles. Coupled with a CEO’s perspective and the experience of building his own $20 million company, he brings a unique depth of insight into business from the top down. Wired to get to know people, Rick works hand-in-hand with business owners of intentional, growth-oriented companies, solidifying relationships as a trusted advisor and confidant to his clients. He leverages his experience to help business owners gain traction and stay laser-focused on the company’s vision, cash flow, and profitability – all while creating big picture solutions for strategic planning, growth and sustainable success.