Cash Flow Forecast
A prediction of future cash inflows and outflows, enabling businesses to anticipate liquidity needs, financing requirements, and investment opportunities.
Cash Flow Forecast
A prediction of future cash inflows and outflows over specified time periods, enabling businesses to anticipate liquidity needs, plan financing requirements, identify investment opportunities, and ensure operational continuity.
For example, a growing technology company might prepare a monthly cash flow forecast showing expected cash collections from customers, payments to suppliers and employees, loan repayments, planned equipment purchases, and resulting cash positions, revealing a potential $200,000 shortfall in month four requiring proactive arrangement of additional financing.
Cash flow forecasts differ from income projections by focusing on timing of cash movements rather than accrual-based revenue and expense recognition. Effective forecasts typically incorporate historical collection and payment patterns, seasonal fluctuations, contractual payment terms, planned capital expenditures, financing activities, and contingency reserves for unexpected events. The forecast horizon varies with business needs—detailed weekly projections for short-term liquidity management and broader monthly or quarterly forecasts for longer-term planning. Regular comparison of actual results with forecasts improves future prediction accuracy and highlights emerging trends or issues requiring management attention.