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Cash flow forecasting

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Plan for cash gaps and surpluses before they happen

82% of companies that go out of business do so because of poor cash flow visibility and management. That’s a bit doomsday, but knowing your cash position is vital to understanding your business’s numbers, staying on top of the flow of your cash and making proactive decisions that help your business grow.

What is a cash flow forecast?

A cash flow forecast is a plan of when cash will come into and out of your business, while clearly showing what you’ll have in your bank account at the end of the month. Cash flow forecasting helps you figure out exactly how much money your business has, how much money it could and should have, and all the things you can do with it.

It’s the most reliable tool you can have in your arsenal to give you a better understanding of your business. If cash is the lifeblood of your business, then cash flow management is the process of keeping your business’s heart beating.

But first, why does cash flow forecasting matter?

Cash flow is the movement of money in and out of your business. It’s always flowing so it’s never a static number. Outgoing expenses, incoming payments, bill timing, and business fluctuations all impact your bottom line.

Cash flow is more than having money in the bank, and good management is key to making sure your business’s future is bright. When you have clear insight into your future cash position you can effectively plan for, and manage, any financial situation.

It’s more than thinking about money in versus money out.

Ok great. How does forecasting help my business?

A cash flow forecast gives you insight into your business’s future cash. Knowing that you have the right money at the right time helps you be proactive in your business. Incorporating a forecast into your financial management systems also gives you the ability to predict problems before they happen and helps you grow at a sustainable rate.

That old adage is true: success starts with planning. Sales increases, lost revenue, unexpected costs, new hires, or seasonal fluctuations are easily planned for when you create cash flow forecasts. Your forecast is there to help you see what’s what so you know exactly when you have the cash to reinvest in your business, or if you have a gap that your spreadsheet would have missed. It’s the guardian angel you’ve always wanted for your business (and it lives in your computer).


From keeping track of overdue payments to foreseeing upcoming cash flow gaps, there are numerous advantages to cash flow forecasting. Find out more by reading our article on the 7 advantages of a cash flow forecast.

There are two main methods for calculating a cash flow forecast, known as the direct and indirect methods. The direct method is ideal for short to medium-term planning, while the indirect method uses your P&L combined with your balance sheet for a longer-term forecast. Want to know more? Read our article that explores the differences between direct and indirect forecasting to learn more.

The best way to improve your cash flow forecast is to make sure everything in your accounting software is kept up to date. As Float automatically syncs with Xero, Quickbooks and Freeagent, you can then update your cash flow at the click of a button. Magic.

Also, while we’re here, quite a few people still use a spreadsheet to keep track of their cash flow forecast. Now we’re not knocking it, but we think if you gave cloud-based software like Float a go you’d really, really like it. It makes life so much easier.