How to Make a Cash Flow Forecast

What a cash flow forecast is (and why profit is not cash)

A cash flow forecast predicts the actual money moving in and out of your account over a future period, and the balance left at the end of each week or month. It answers one question that keeps business owners awake: will I have enough in the bank to cover what is due? That is different from whether you are profitable. You can be profitable on paper and still run out of cash, because a profit can sit in an unpaid invoice while the rent is due now. Cash flow is about timing, not totals.

This is why so many otherwise healthy small businesses hit trouble: the money they are owed arrives later than the money they owe. A forecast makes that timing visible. It will not conjure cash from nowhere, but it turns a nasty surprise into a problem you can see coming and plan around, which is most of the battle.

The four things you need

A forecast needs only four ingredients, and you can get all of them without any special tools:

Everything else is just arithmetic on these four. The skill is not in the maths; it is in being honest and realistic about the timing.

Step 1: start your cash flow forecast

Start a simple spreadsheet with a column for each period ahead, a week or a month each, and a row structure of money in, money out, and balance. In the first cell, put your opening balance: the real figure in your business account today. This is your anchor, so use the actual number, not a rounded guess.

For most small businesses a weekly forecast over the next 12 or so weeks is the sweet spot: granular enough to catch a tight week, short enough to be realistic. If your income is lumpy or seasonal, a monthly view over 6 to 12 months can sit alongside it.

Step 2: money coming in (by when you will be paid)

List every expected receipt in the period you actually expect the cash to land, which is the single most important move in the whole forecast. An invoice you send today on 30-day terms is cash next month, not this week, so it goes in the column for when payment is due, not when you raised it. If a client usually pays a week late, forecast them a week late (and see how to protect cash flow when clients pay late). Be realistic rather than optimistic; a forecast full of hopeful early payments is worse than useless.

This is where your own records do the work. Every invoice you have sent is a future receipt with an amount and a due date, so your list of unpaid invoices is most of your money-in already written. With Remit you can keep your invoices in one place and run a statement of account per client showing exactly what they have been billed and what is still outstanding, which is the raw material of the inflow side of your forecast. Add any other expected income, such as a deposit or a regular retainer, in the week you expect it.

Step 3: money going out

Now list everything you expect to pay, each in the period it falls due. Split it into two kinds so nothing is missed. Fixed costs are the predictable ones: rent, subscriptions, loan repayments, salaries. Variable and occasional costs are the lumpier ones: supplier bills, materials, a tax payment, equipment, and the money you draw for yourself.

The items people forget are the ones that hurt, so look ahead for the big irregular outgoings in particular: a periodic tax bill, an annual insurance renewal, a sales tax or VAT/GST payment. Our guide on how much to set aside for tax helps you size the tax line so it never ambushes the forecast. If you collect sales tax, VAT or GST, remember that money is not yours to spend, so treat it as an outgoing you are holding on someone else's behalf.

Step 4: the running balance

This is the part that makes the whole thing worth doing. For each period, take the balance you started with, add that period's money in, subtract that period's money out, and the result is your closing balance, which becomes the opening balance of the next period. Carry it along and you have a running line showing roughly how much cash you will have at the end of every week or month ahead.

Now read it. Any period where the running balance dips low, or goes negative, is a cash squeeze you can now see in advance. Spotting that a given week is going to be tight, while it is still weeks away, is the entire point: you have time to chase an overdue invoice, delay a non-urgent purchase, ask a supplier for longer terms, or arrange cover. Without the forecast, you would have met the same squeeze on the day, often with far fewer options.

A simple worked example

Here is a bare-bones four-week forecast to show the shape, starting with 2,000 in the bank. Each week, the closing balance carries into the next:

Week 1: open 2,000, in 1,500, out 1,800, close 1,700.
Week 2: open 1,700, in 800, out 2,600, close −100.
Week 3: open −100, in 3,000, out 1,200, close 1,700.
Week 4: open 1,700, in 1,000, out 1,500, close 1,200.

Week 2 dips below zero, because a big outgoing lands before a client pays. Seen on the forecast weeks ahead, it is a solved problem: chase that client, move the purchase, or arrange a buffer. Met on the day, it is a crisis. That gap is the whole value of forecasting, and your real sheet is just this with more rows and your own numbers.

Keep your cash flow forecast rolling

A forecast is only useful if it stays current, so update it regularly, ideally weekly, replacing each estimate with what actually happened and adding a new period on the end so you always see the same distance ahead. This rolling habit keeps it honest and takes only a few minutes once it is set up.

Once it is running, use it to ask what-if questions, which is where a forecast earns its keep. What happens to the balance if your biggest client pays 30 days late? If a quiet month cuts income by a third? Copy the sheet, change the numbers, and you see the impact before it is real. That is how a forecast turns from a record into a decision-making tool, and it pairs well with the habits in our guide on small business cash flow tips.

The bottom line

A cash flow forecast is four things, opening balance, money in, money out, and a timeline, combined into a running balance you read for the weeks where cash gets tight. Time every receipt by when you will actually be paid, not when you invoiced, list the irregular outgoings people forget, and update it weekly. Lean on the records you already keep: your sent invoices and a client statement are most of the money-in side done for you, so clean invoicing is forecasting half-built.

Do this and you are far less likely to be surprised by cash, which is often the difference between a business that rides out a slow month and one that does not. A forecast is an estimate, so expect the numbers to be wrong and keep updating them; this is general business information rather than financial advice, so adapt it to your situation and talk to an accountant for anything complex.