Cash flow is the lifeblood of every business. It doesn’t matter how profitable our business looks on paper — if we can’t manage the timing of money coming in and going out, we risk running short when we need it most.

That’s where a cash flow forecast comes in. It’s not just a spreadsheet exercise; it’s a tool that gives us clarity, reduces stress, and helps us make smarter decisions for the future.

In this article, we’ll break down what a cash flow forecast is, why it’s so important, and exactly how to build a simple one that actually works for your business.

What Is a Cash Flow Forecast?

A cash flow forecast is an estimate of how much money will flow into and out of your business over a certain period — usually weekly, monthly, or quarterly. It shows:

• Cash inflows – sales, customer payments, loans, investments.

• Cash outflows – rent, payroll, supplier invoices, taxes, loan repayments.

• Net cash flow – the difference between inflows and outflows.

Think of it like a roadmap. Instead of just guessing whether you’ll have enough to cover bills next month, a forecast helps you see the peaks and troughs ahead.

Why Every Business Needs One

Even successful, growing businesses can get into trouble without a forecast. Here’s why:

1. Avoiding surprises – No one likes scrambling to cover payroll or rent because they didn’t see a shortfall coming.

2. Better decision-making – Thinking of hiring? Expanding? Investing in equipment? A forecast tells us if it’s affordable.

3. Peace of mind – When we can “see ahead,” we sleep better at night knowing what’s coming.

4. Building resilience – Forecasts help us plan for best- and worst-case scenarios, so we’re ready for anything.

5. Stakeholder confidence – Lenders, investors, and even suppliers love seeing a business with its cash under control.

The Building Blocks of a Simple Cash Flow Forecast

You don’t need to be an accountant to build one. All you need is:

• A spreadsheet tool like Excel or Google Sheets (or accounting software like Xero, MYOB, or QuickBooks).

• Accurate starting numbers from your bank account and accounting records.

• A basic structure — money in, money out, and a running balance.

Let’s walk through the steps.

Step 1: Set Your Timeframe

Decide how far ahead you want to forecast.

• Short-term (weekly, 13 weeks) – Best for businesses with tight cash positions, seasonal swings, or rapid growth.

• Medium-term (monthly, 12 months) – Good for most small to medium-sized businesses.

• Long-term (multi-year) – Helpful for strategic planning, loans, or investment decisions.

Tip: Start small. A 12-week forecast is manageable and gives you immediate insights. You can expand later.

Step 2: Estimate Your Cash Inflows

This is money coming in. Be realistic — it’s better to underestimate than overestimate.

Include:

• Customer payments (based on invoices and expected payment times).

• Cash sales.

• Loans or finance injections.

• Tax refunds or grants.

• Owner contributions.

Key point: If you issue invoices with 30-day terms, don’t assume you’ll get the money immediately. Build in delays for late payers.

Step 3: Estimate Your Cash Outflows

This is money going out. It’s often more predictable than inflows.

Include:

• Rent and utilities.

• Payroll and superannuation.

• Supplier invoices and stock purchases.

• Loan repayments and interest.

• Tax obligations (GST, PAYG, income tax).

• Subscriptions, insurance, and overheads.

Tip: Go through your bank and credit card statements from the last 6–12 months to make sure you capture everything.

Step 4: Calculate Net Cash Flow

Net cash flow = Inflows – Outflows

This shows whether you’re in surplus (positive cash flow) or deficit (negative cash flow) for the period.

Step 5: Track the Closing Balance

This is the cumulative effect — what you have left in the bank at the end of each period.

Starting balance (what’s in the bank now) + net cash flow = closing balance.

Your closing balance tells you if you’ll have enough to pay your bills.

Step 6: Review and Adjust Regularly

A forecast is not “set and forget.” It’s a living tool. Update it regularly with actual numbers and adjust your future estimates.

• Compare forecast vs. actuals.

• Identify where your assumptions were off.

• Refine your estimates for greater accuracy over time.

Tips to Make Your Forecast Work in Real Life

1. Keep it simple – Overly complex models don’t get used. Start with inflows, outflows, and balances.

2. Use rolling forecasts – Always look 12 weeks or 12 months ahead, updating as time passes.

3. Build in buffers – Assume some invoices will be late, and add a cushion for unexpected expenses.

4. Plan scenarios – Create “best case” and “worst case” versions to see how resilient your business is.

5. Leverage tech – Cloud tools like Xero, Futrli, or Spotlight Reporting can automate much of the process.

Common Mistakes to Avoid

• Overestimating sales – Hope is not a strategy. Be conservative.

• Forgetting taxes – BAS, PAYG, and super can sneak up on you.

• Not accounting for seasonality – Christmas, EOFY, or industry cycles can cause major swings.

• Failing to update – A forecast that sits untouched for six months is not beneficial.

A Simple Template to Get Started

Here’s a basic structure you can create in Excel or Google Sheets:

Columns:

• Week/Month

• Opening Balance

• Inflows (broken into categories)

• Outflows (broken into categories)

• Net Cash Flow

• Closing Balance

Rows:

• Each week or month.

With just these elements, you can see your cash position at a glance.

Short Example: A Small-to-Medium Sized Café

Let’s say you run a café.

• Inflows: $60,000 sales per month, but 20% of invoices are paid 2 weeks late.

• Outflows: $25,000 wages, $10,000 rent, $20,000 supplies, $5,000 overheads.

Without a forecast, you might assume $60,000 always covers $60,000 of costs. But by factoring in late payments, you see a cash shortfall in certain weeks — giving you time to arrange an overdraft or adjust expenses.

Why This Matters More in Tough Times

In times of economic uncertainty, a cash flow forecast isn’t just helpful — it’s essential. Rising costs, delayed payments, and unpredictable demand make cash flow visibility critical.

With a forecast, we can:

• Spot cash gaps months in advance.

• Decide whether to delay expenses or speed up collections.

• Give confidence to banks or investors if you need funding.

How an Accountant Can Help

While building a forecast yourself is possible, an accountant can:

• Set up an efficient template or software solution.

• Help refine assumptions with industry benchmarks.

• Provide scenario planning for growth, investment, or downturns, particularly for complex cash flows.

• Keep you accountable by reviewing it regularly.

At Shepherdson & Company, we often see clients breathe a sigh of relief once they have a clear forecast. It transforms uncertainty into confidence. We’ve uploaded a Cash Flow Statement Template based on AASB 107 in our Toolkit section here.

Final Thoughts

A cash flow forecast isn’t about predicting the future perfectly — it’s about shining a light on what’s ahead so you can prepare, adapt, and stay in control.

Start small, keep it simple, and update often. With a clear forecast, you’ll make better decisions, reduce stress, and build a stronger business.

Your numbers don’t have to be intimidating — they can be empowering.