4 Easy Steps to Creating a Cash Flow Forecast

Title: Four Easy Steps to Creating a Cash Flow Forecast

Author: Kelly Gonsalves

Not to sound greedy, but money is everything when it comes to business. Big or small, entrepreneur or corporation, money keeps the wheels turning, the doors open, and the lights on.  Cash is king! That’s why managing it may be the single most important thing you have to do. Accurate accounts payable and receivable is essential to the success of any business.

But, you can’t just live in the present. Money going out and coming in is great, but what about the future? What do you expect to pay in the next year, and how do you plan to get it back?

Cash flow forecasting can determine almost everything about your business. Whether or not you buy more supplies, hire employees, increase sales, or hire a bookkeeper (wink) would be determined by how much money you expect to have. Having expectations and a fairly solid outlook of future spending and inflow are what make these things possible, and will help you plan for the down times, if there are any (knock on wood).

How to Forecast Cash Flow

For those business owners with a smaller operation (maybe an eCommerce business with finances that are still manageable by a small team), you may want to give your own cash flow forecast a shot.


It’s a fairly simple process with four steps. Well, except the first one.

1. Create a Sales Forecast

I know, this is already complicated. But, a sales forecast is good to have. If you can manage it, this will really make your cash flow forecast worthwhile. It’s basically the projected sales for your business over a certain period of time. This takes into account growth, and is heavily reliant on last years’ numbers.

There are a lot of companies and professionals that offer this service. But, again, if you’re small enough and don’t plan on any big expansions quite yet, whip out your calculator and give it a shot.

2. Detail Cash Inflows

Like I said, cash flow forecasts combine what money goes out and what comes in. Once your sales forecast is completed, that will be included in your “inflows” column on the forecast. But, there’s a lot more to it than that.

Customers sending in their payments, as well as any other money coming into  your business must be accounted for. If you’re a brick-and-mortar operation with an online store, be sure not to forget one or the other’s sales numbers in the report. Remember account for the differential from international payments also. If you’re working with an overseas supplier or vendor, exchange rates may factor into what you end up with when the check is deposited.

3. Detail Cash Outflows

This is just a fancy way of saying keep track of your receipts. Anything you’re paying for that involves your business goes into the outflows category of your cash flow forecast. Supplies, car repairs, snacks for the kitchen, anything and everything. Then there’s the obvious stuff: bills, payroll, and any vendors you’re paying back.

Cash outflows  can be harder to keep track of than cash inflows. Using a dedicated business checking account and credit card will allow you to track spending more easily than using cash or your personal accounts. Not only will this help you keep track for your forecast, it’ll help you out come tax season.

4. Put it all Together

There’s a bit of math here, but I think you can handle it. What you’re basically doing is subtracting your cash outflow from your cash inflow. For larger operations, it gets a bit more complicated. But, for an inexpensive, fairly easy cash flow forecast, that’s all you’ll need.

What’s left over is your profit, which you can really do whatever you want with. You could take the family on vacation, add a little something to the office, or work on plans to expand your operations (if there’s enough left over).

For those with larger operations, this is probably a bit daunting. Even a “small business” with 20 or more employees is a lot to keep track of and manage. Your sales are generally higher volume and in multiple markets, outflows are everywhere to (it seems like) everyone, and remember that thing about foreign exchange I mentioned earlier? It gets a lot more complicated when you’re working in 3 or 4 countries instead of 1 (personally I use Veem to solve that issue).

Why a Bookkeeper?

For business owners, bookkeepers and accountants like me not only help you deal with your current cash flow, but plan for the future. We here at Totally Booked want to see you thrive now, and for as long as you’re in business.

We’re experts. We work with numbers, businesses, and their owners every single day. It might seem easier to gather all this information yourself, but what are you really getting out of it? By choosing a bookkeeping firm that works for you, you can be confident your cash flow, present & future, is accounted for.


Alejandro Tavera