How to Forecast Cash Flow of Your Business

Cash flow refers to the total monetary activity occurring in your company. Typically it is simply the amount of money that moves from sales into your company, but it could be capital loaned to your business, rebates, and grants. With that said, every business needs to forecast cash flow to avoid problems.

Measuring Your Cash Flow

A company’s income is reflected in a cash flow statement. A positive cash flow brings in more money than goes out. You can make the positive cash flow work for you by managing your working capital and creating a cash flow forecast to better estimate your revenues and expenses in the future.

How to Forecast Your Cash Flow

Cash flow forecasting involves estimating how much money you will have coming in and going out of your business in the future. A cash flow forecast is an essential management tool that can help you see if you’ll have enough cash to run your business or expand it. You will also be able to tell if your cash flow in coming or going out of your company is more or less than expected.

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Forecast Your Income or Sales

Most individuals pick monthly as a period to forecast. Make a sales forecast by reviewing last year’s data to see if there are any patterns. You may adjust your sales forecast based on last month’s sales and other variables. If there are no previous sales data, plot out all the expected revenue. This will give you a clear idea of how much cash the business will need to operate.

Estimate Cash Inflows

Next, you will estimate your cash inflows or alternative income sources other than revenue. This will differ depending on the business, but you might include other sources of income, including royalty payments, franchise fees, or license fees.

Estimate Cash Outflows and Expenses

When considering how much money goes out the door, calculate the total expense of making goods available for your customers. This will help you determine the correct cash flow in the future (for instance, if you initially estimated selling ten units in March but later realized you sold only 5).

In addition to being spent on management and operation, expenses may also be utilized to conduct the company. Therefore, the fees will be different based on the type of business.

Compile the Estimates Into Your Cash Flow Forecast

Now that cash flow is all about timing, you will need to begin with an opening bank balance. Your actual cash on hand is this first number. Then add in the cash inflows and subtract the cash outflows for each fiscal period. The final number at the period’s end is the closing cash balance. This will be the opening cash balance for your next accounting period.

Review Your Estimated Cash Flows Against the Actual

After finishing your financial forecast, review the results and see what the numbers indicate. This will help you see if your actual cash inflow differed from your estimates.


A business owner finds out their cash posture now and into the future through cash flow forecasting. A critical component of this analysis is ascertaining where proceeds from the known source ought to come.

Moolamore is the ideal cash flow forecasting tool for your business. Do more with Moolamore!

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