A cash flow forecast helps you plan for future cash needs, giving you insight into potential cash surpluses or shortages. Here’s how to create a cash flow forecast:
How to Create a Cash Flow Forecast
Estimate Sales and Inflows:
Use past sales data to project monthly revenue. Factor in any seasonality or expected shifts in demand.
Calculate Expenses and Outflows:
List all regular expenses (e.g., payroll, rent, utilities) as well as variable costs, loan repayments, and any upcoming one-time costs.
Set Up a Monthly Projection:
Using a spreadsheet or a cash flow management tool, create a forecast showing expected inflows and outflows for each month.
Include Buffer for Unexpected Costs:
Add a buffer for any surprise expenses, like equipment repairs or sudden supply cost increases.
Review and Adjust:
Update your forecast monthly to reflect actual cash flow, adjusting as necessary for any changes.
A cash flow forecast enables you to plan with confidence, ensuring that you have the cash to cover expenses, avoid debt, and pursue growth opportunities.
Need help building a cash flow forecast? 786 Venture CPA specializes in cash flow planning, providing custom forecasts that prepare your business for any financial situation.