Building a cash flow forecasting process
A cash forecast estimates how much cash the business will have over the coming weeks or months. The value is less in the first forecast and more in updating it on a schedule so surprises show up early.
The inputs
Start with today's cash, then add expected collections from open invoices and planned billing, and subtract payroll, rent, bills and other known payments. Service businesses often build collections from their receivables aging.
Pick a rhythm
Many businesses use a rolling 13-week view updated weekly when cash is tight, or a 12-month view updated monthly when it is not. Consistency matters more than the format.
Compare forecast to actual
Each period, compare what happened to what was forecast and note why it differed. Over time this shows which assumptions are reliable, such as how quickly clients actually pay.
What to check
- Forecast horizon and update frequency
- Where collection assumptions come from
- Who owns updating it
- Whether forecast and actual are compared
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Frequently asked questions
Is a budget the same as a cash forecast?
No. A budget plans income and expenses for a period; a cash forecast predicts when cash actually moves. Many businesses use both.
Is this finance operations guide advice?
No. Sam's List writes these guides for education. They describe common questions and processes, not advice for your specific situation.
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