Build a Custom Cash Flow Forecasting Tool for your Business

By February 6, 2020 April 28th, 2020 Tips to Improve Performance

Last Updated on April 28, 2020 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 you are paid by your customer. 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. cash flow forecasting

However, improperly tracking your cash flow can lead to shortages or other obstacles that leave you unable to sustain your business. If you run out of funds during the production stage, you’ll never end up seeing a profit. Cash flow forecasting can help you anticipate these issues before they arise.

Why Create a Cash Flow Projection?

Cash flow is different than profit. Profit is what happens after the sales process is completed, while cash flow is a projection of your resources after debts have been paid, and income has 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 have to manage the cash. If you don’t forecast your cash flow, you risk creating a cash panic when you don’t have 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, and this is a huge mistake. Big businesses do forecasting every month and watch their treasury grow every day. Cash flow forecasting can tell you in advance when you will need to 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 that you have a monthly budget for every line on your profit and loss statement. In addition, to be accurate, you will need to adjust your sales, margin, and expense forecasts based on recent trends. The cash flow template’s accounts should be adjusted to mirror your chart of accounts.

In this spreadsheet, you will see rows for sales coming in as well as 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. Feel free to add rows as necessary depending on your specific business needs. 

As a business owner, it’s not enough to rely on your profits to plan out your finances. Cash flow forecasting can give you an accurate view of your income and output for any given month. Over time, this information will allow you invaluable insight into the finances of your organization.

Creating a cash flow forecasting model is crucial for the long-term success of your business. If you’re lost, fill out my contact form. We’ll set up a complimentary video call to talk about building a cash flow forecasting tool for your business using my simple spreadsheet.


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