Understanding Cash Flow Forecast
A cash flow forecast is an estimation of the amount of money you expect to flow in and out of your business. It includes all your projected income and expenses.
The Forecast Formula
Net Cash Flow = Total Inflows - Total Outflows
Closing Balance = Opening Balance + Net Cash Flow
Closing Balance = Opening Balance + Net Cash Flow
Why is it important?
- Identify Shortfalls: Spot months where you might run out of cash before it happens.
- Business Growth: Plan when you can afford to purchase new equipment or hire staff.
- Investor Confidence: Show lenders that your business is managed professionally.