Last Updated on December 6, 2024 by Dave Schoenbeck
Most businesses suffer from a “cash gap.” This is when you, as the owner, spend cash on payroll and materials long before your customer pays you. It’s necessary to do this before you ever see a profit from your goods or services, as labor, materials, and marketing all cost money. 
However, improperly tracking your cash flow can lead to shortages or other obstacles that make it impossible to sustain your business. For example, you’ll never see a profit if you run out of funds during the production stage. Forecasting can help you anticipate these issues before they arise.
Why Create a Cash Flow Projection?
Cash flow is different than profit. Profit happens after the sales process is completed, while cash flow is a projection of your resources after debts have been paid and as been collected during a given period. Cash flow forecasting helps you see what money you have coming in from month to month so you can adequately plan for the future.
You can’t run your business on profits alone; you must manage the cash. If you don’t forecast your cash, don’t risk creating a cash panic when you don’t have the resources to accomplish your goals. Inadequate cash flow kills both underperforming and red-hot businesses alike. Proper cash flow is the lifeblood of all organizations.
Very few small businesses do cash flow forecasting, which is a huge mistake. Big companies do forecasting every month and watch their treasury grow every day. Cash flow forecasting can tell you when you must tap your line of credit. It will also tell you how much you need to reserve in the good months to help you get through the cash-intensive months.
Creating a Cash Flow Forecast Spreadsheet
To help with your cash flow forecasting, I have created a spreadsheet that you can use as a tool from month to month. Click here to download it.
This cash flow forecasting tool assumes you have a monthly budget for every line on your profit and loss statement. In addition, to be accurate, you must adjust your sales, margin, and expense forecasts based on recent trends. The cash flow template’s accounts should be templated to mirror your chart of accounts.
In this spreadsheet, you will see rows for sales and expenses to be paid. You can track these expenses and sources of income from month to month to see where adjustments should be made throughout the year. Depending on your business needs, please add rows as necessary.
As a business owner, it’s not enough to rely on its profits to plan your finances. Cash flow forecasting can give you an accurate view of your monthly income and output. Over time, this information will allow you invaluable insight into your organization’s finances.
Your organization’s cash flow forecasting model is crucial for its long-term success. If you need help, fill out my contact form. We’ll set up a complimentary call to discuss using my simple spreadsheet to build a cash flow forecasting tool for your business.
Coach Dave
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