How to build a cash-flow forecast

Forecast the bank balance, not just sales

A cash-flow forecast estimates the timing of cash receipts and payments. Start with available opening cash, add expected receipts and subtract payments. The closing balance becomes the next period’s opening balance. Business.gov.au’s cash-flow guidance explains this basic structure.

A 13-week forecast uses weekly columns for roughly one quarter. It can make near-term payment pressure easier to see than a monthly total. Choose a start date and keep the same week-ending convention throughout the model.

Build the forecast in five passes

1. Reconcile opening cash. Identify which bank accounts are included and any restricted amounts. Account for payments already committed but not yet cleared.
2. Schedule receipts. Use expected collection dates for invoices, deposits and other cash inflows. Separate confirmed receipts from uncertain opportunities.
3. Schedule payments. Include payroll, suppliers, rent, debt payments, equipment, taxes and owner distributions where applicable.
4. Calculate weekly closing cash. Keep financing flows separate so an operating shortage is visible.
5. Test the timing. Move a major customer payment back two weeks and compare the lowest projected balance.

Three weeks inside a 13-week model

These invented figures show a low point of $15,000 in week 2, even though cash recovers in week 3. If $10,000 of week 2 receipts moves into week 3, week 2 closes at $5,000. That timing change may matter more than the quarter’s total sales.

Make the forecast a weekly habit

Replace the completed week with actual receipts and payments, explain significant differences, and add a new week at the end. Keep a short note on changed assumptions so you can distinguish a missed collection from a permanent change in demand.

Choose a cash floor based on your own commitments and risk tolerance. If the forecast falls below it, identify options early: follow up on collections, reconsider the timing of discretionary spending, or discuss financing needs. Do not assume a financing facility is available until confirmed.

Avoid the common double counts

• Do not count both an invoice and its later collection as separate receipts.
• Do not count a credit-card purchase and the card repayment as two cash payments in the same bank-based model.
• Separate loan proceeds from revenue and debt principal from operating expenses.
• Include tax and payroll payment dates using your actual obligations, rather than guessed percentages.

A forecast helps you prepare; it does not remove uncertainty. Peak’s project advisory includes cash-flow modeling, while ongoing CFO support includes recurring cash-flow analysis.