Forecast the movement of cash through your business and estimate future closing balances using expected receipts, payments and your opening cash position.
A cash flow forecast estimates when money is expected to enter and leave the business. It can help identify periods where a profitable business may still face a cash shortage because customers pay later than expenses, tax, wages or loan repayments fall due.
Start with the opening cash balance, add expected cash inflows and subtract planned cash outflows for each period. The closing balance becomes the next period’s opening position. Consistency matters: if GST is included in one part of the forecast, it should be treated consistently throughout. Updating the forecast with actual results and revised assumptions makes it more useful for day-to-day decisions.
Understand how timing, GST and payment assumptions affect a useful cash flow forecast.
Profit is an accounting measure of income earned less expenses for a period. Cash flow tracks when money is actually received and paid. A business can report a profit while still experiencing a cash shortage.
That depends on the business. Monthly forecasts are common for a 12-month planning horizon, while businesses with tighter liquidity may also use weekly or rolling short-term forecasts.
Include customer receipts in the period you realistically expect the cash to be received, not simply when the invoice is issued. Payment terms and historical debtor behaviour can make the forecast more realistic.
It can be prepared either way, but the treatment should be consistent. If your cash receipts and payments include GST, remember to also plan for the timing of BAS payments or refunds.
Review the timing and assumptions first. You may need to accelerate collections, defer non-essential spending, adjust stock or staffing decisions, negotiate payment terms or consider funding well before the shortfall occurs.
We can help turn your forecast into practical cash flow actions, including debtor management, tax planning and expense timing.
