A Beginners Guide To Forecasting Cashflow

A quick guide to the basics of cashflow forecasting


There are a number of obstacles every entrepreneur has to deal with when setting up their business. The best way to deal with these obstacles is to have strategies in place to work through whatever situations arise.

What is Cash Flow Forecast?

A cash flow forecast is used by businesses around the world and is considered to be an imperative business tool. The purpose of a cash flow forecast is to identify the amount of cash that is expected to come in (receipts) as well as go out (payments) from your business. Cash flow forecasts are extremely useful for future planning as they assist you in calculating the expenses and revenue of your business, as well as whether you can aim for expansion at the current time. The formula to calculate cash flow is simple:

Net Cash Position = Receipts – Payments

Cash flow forecasts are mainly used for the purpose of accurately calculating the expenses and the probable income by the end of a selected time period. Cash flow forecasts greatly help business owners make sensible decisions in terms of assets and capital, especially liquid assets.

Learn How to Prepare a Cash Flow Forecast Chart

Once you have all the necessary details and have outlined the goals you want your company to achieve, it will not be difficult to create a cash flow forecast. Here are 3 steps to help you prepare a cash flow forecast chart:

1.Cash Inflows

Cash inflows are based on the money you expect to collect during a given time period. This can include anything from interest earnings to repayment of debts. Simply speaking, any money coming in the form of cash is considered an inflow.

2.Cash Outflows

The cash outflows on your chart are your expenses, such as loan repayments, taxes, supplier payments, and credit card payments. Cash outflows also include regular and irregular payments as well as seasonal payments, such as rent, repair and maintenance and the inventory you purchase. In other words, any cash you are going to be spending is included.

3.Figuring Out Your Cash Flow Position

You simply have to add all the cash inflows and then subtract the total of the cash outflows to determine your business’ cash flow position for a given time period.

Cash flow is one of the most important tools for a business as it helps to account for the cash that is going to be coming in and leaving your business. It can help you plan for the future.

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