Effective cash flow forecast for small businesses


Forecasting cash flow is key to the success of any small business. It allows you to anticipate and plan for times when cash might be tight and provides a valuable tool for managing day-to-day finances.

By forecasting your cash flow on a regular basis, you can ensure that your business always has enough money to meet its obligations.

As a small business owner, you know that cash is king. Having a strong understanding of your cash flow—the inflows and outflows of cash—is essential to keeping your business solvent and avoiding financial difficulties.

With a well-crafted cash flow forecast, you can avoid the pitfalls of a sudden drop in cash flow and keep your business running smoothly.

“Never take your eyes off the cash flow because it’s the life blood of business”

- Richard Branson

In this blog post, we will discuss the steps you need to take to create an effective cash flow forecast for your business accurately.

What is a cash flow forecast?

A cash flow forecast is an estimate of the future movement of cash within a business. The forecast can be used to assess whether a business will have sufficient cash to meet its obligations as they fall due, and if not, how this shortfall can be funded.

It can be a valuable tool for business owners, helping them to anticipate and plan for changes in cash flow and their future financial needs.

The forecast is based on an analysis of past and present cash flow patterns, and it provides a snapshot of where the business expects to be at various points in the future.

It can help businesses to identify potential financial problems before they arise, and it can also be used to make decisions about things like investment and growth.

A cash flow forecast should cover a period of time that is appropriate for the business and should be updated on a regular basis (monthly or quarterly or yearly, for example).


Why is it important for your business?

While creating a cash flow forecast may require some initial effort, the benefits of having this information at your fingertips can be invaluable.

Cash flow forecast is important for businesses because it:

  • Predicts inflows and outflows of cash
  • Identifies periods of high or low cash flow i.e., surplus or shortage of money
  • Identifies potential shortfall in funding and avoids financial difficulties
  • Helps make informed decisions about how to spend your money and allocate resources
  • Gives idea of what is going to happen with finances in the future and manage liquidity
  • Gives a clear picture of your company's financial status to stay on top of finances
  • Allows businesses to plan better for the future growth and opportunities
  • Can help avoid pitfalls of running out of money or being caught off-guard by unexpected expenses

There are many different possibilities for how your business could perform. You need a plan that accounts for all of them, including best- and worst-case scenarios so you know what to expect in any situation!

It is crucial to manage your cash flow. The ATO has said so too! Read more to know.

Manage your business cash flow | Australian Taxation Office

Why is it important for your business?

By monitoring the performance of your business, you can see if it's over or underperforming.

If sales are higher or lower than forecasted for example, there may be a reason why this happened such as changes in strategy by competitors or new entrants into the market who have caused consumers' spending habits change accordingly.

It would then affect revenue streams positively if they were aware of these fluctuations beforehand but negatively otherwise without proper preparedness measures taken

Financial metrics can be tricky. Do you wish to know which financial metrics are crucial for your business?

Read our guide on Financial Metrics before starting.

Steps to follow for a cash flow projection:

Decide how far you want to plan for:

The first step in creating a cash flow forecast is to decide how far into the future you want to plan. This will depend on your specific needs and goals. It could be weekly, monthly or annually.

Once you have determined the timeframe for your forecast, it is important to gather accurate financial information.

Gathering all income related information:

The second step is to gather all income related information. This includes estimating how much money will be coming in from sales, investments, and other sources. Once you have all of this information, you can begin to create a projected income statement.

This will show you how much money you are realistically bringing in each month/year.

It is important to be as accurate as possible in estimating future income, as this will have a direct impact on the overall cash flow forecast and it will not be as helpful in managing your finances.

To get a more accurate picture, it is often helpful to look at historical data to see how income has varied in the past. This can give insight into seasonal trends and other factors that may impact future income.

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Gather estimated list of costs:

The third step is to gather all estimated costs and expenses related information. This will include both fixed and variable costs, such as rent, utilities, salary, inventory, labor costs, overhead costs and marketing expenses.

For an accurate estimate of all future costs, it is important to review past financial statements and track any changes in spending patterns.

To avoid missing any bills, it's a good idea to go through your historical payment records and make sure you don't overlook annual expenses like accounting fees and taxation expense.

By taking the time to carefully estimate all costs and expenses, businesses can avoid the common pitfall of underestimating their cash needs and running into financial trouble down the road.

Work out your cash flow:

The fourth step in preparing a cash flow forecast is to work out your running cash flow. This will show you the change in your cash balance from one period to the next.

Once you've entered your annual income and expenses into the cash flow forecast, it's ready to use.

Simply add an opening bank account balance with revenue less expenses for the period selected and calculate how much money will be left over at the end of each year based on current spending & income levels!

You can now easily forecast your cash flow figures using our online calculator. Please let us know and we will help streamline your cash management process.


Keep up to date:

One of the most important aspects of running a successful business is keeping your cash flow forecasts up to date. It can make sure that what's happening with business performance matches the information in these documents and avoid any surprises when it comes time to pay bills!

By regularly projecting your income and expenses, you can ensure that you always have enough money on hand to meet your financial obligations.

This process can be time-consuming, but it is well worth the effort. After all, nothing is more frustrating than watching your business fall apart due to a lack of cash. With a little foresight and planning, you can avoid this fate and keep your business thriving for years to come.


Forecasting your cash flow is a critical step in ensuring the success of your small business. By considering all of your inflows and outflows, you can anticipate and create a plan that will help you manage your day-to-day finances and avoid any potential financial difficulties.

With just 4 simple steps (as explained above), you can monitor the financial performance of your business and identify the areas of improvement. This will help you make more strategic decisions for the future of your business.

At Accuratee, our team of experts can help you create an accurate forecast so that you always have a clear picture of your company’s finances. Contact us today to get started!

Book a call today and take advantage of all our excellent services.

You can call us at 1800 96 50 90 | email at info@accuratee.com.au

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