How do you prepare a Short-term Cash Flow Forecast and why is it Important?

Short-term cash flow forecasting is critical to the management of your business’s cash flow. It takes into account the money you have, the cash you expect to bring in, and what is expected to come out in a certain period. This is usually a 13-week period. 


Cash Flow Forecasting is important as they provide you with visibility into your future cash position They provide insight into where cash maybe tight and highlight when you need to take action to smooth out cash gaps

How to prepare a short term cash flow forecast in Moolamore

They are also incredibly important when it comes to requesting support from banks or investors as they become part of an investment pack of information around the health of your company and your growth for the future. 


Here are the five key steps to ensure you are heading in the right direction:


  1. Start with historic cash flow.


Firstly make sure your historic financial data is reconciled against your bank statement. 

Starting at a clean up-to-date point allows you an accurate opening balance. 


Ensure any aged credit or debt has been assessed and estimated payment terms are adjusted depending on your historic trend. 


This is a good point to reassess your payment terms and negotiate clearer lead times. Adjust any customer or suppliers that you believe may be delayed by a week or so depending on when you believe the transactions will occur. 


The graphs in the MoolahMore app can clearly show you detail of both expenses and invoices so you can use this as a guide when negotiating new payment dates to cover any urgent cash gaps 


  1. Add the coming months


Include any receipts or payments you know will be coming in. 


These include:

Rent or loan repayments

Utility bills

Sale of assets

TAX or GST payments




  1. Estimate Future Transactions.


Talk to your sales team at the point and plot future dates of sales or purchases you know are potentially coming up. 


Using your standard payment terms as a starting point you can plot these transactions into the MoolahMore transaction calculator. Allow for a buffer of time for customers you believe may not pay in on time so you can have a bit of a safety net from the beginning. 


Future expenses should also be accounted for based on your likely payment terms. Ensure you have the most accurate value or overestimate giving yourself another safety buffer.


  1. Double-check the details.


At this stage, double-check against your historic cash flow from the last couple of months and the same period in the last year. Often we have forgotten about an annual recurring payment like a website, an insurance payment which could throw a spanner in the works if you do not have sufficient cash reserves to cover them. 


  1. Make sure it makes sense.


Ask questions like did you expect to have more cash? Does the trend follow the last month or the last year? If there is something you feel that is not quite right ensure you get it to sense check with your accountant or financial advisor.  


Sharing a forecast with MoolahMore is very simple, just invite a member and once you are happy with the forecast you can share it with one click. 


To help you see how simple it is to create short term forecasts with MoolahMore there is a demo forecast set up once you sign up to the 30 day free trial


Click this link to be taken to the download page to see how it will make your forecasting smarter

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