Five Steps On How to Create a Cash Flow Forecast

cash flow forecast

Creating Assumptions for the Cash Flow Projections


The income statement reports billings and accrued expenses. The cash flow statement reports collections and payments—cash inflow and outflow. The cash flow statement differs from the income statement in that it does not show non-cash items like depreciation expense, but does contain cash outlays like loan principal repayment that aren’t shown in the income statement.

The cash flow statement

The cash flow statement is a crucial benchmark for your business. Use it each month to determine whether your financial projections are accurate. You must monitor cash flow constantly to make sure your checking account always has a positive balance and that you’re bringing in more cash than you’re spending. If not, you need to revise your plans.

Think of your cash flow statement like a checkbook register.

In fact, the cash flow statement format most commonly used for small businesses mimics the format of a monthly checking account statement. It shows the opening balance, anticipated cash deposits, anticipated cash withdrawals, and the end balance for each month, which becomes the opening balance for the next month.

If you plan to seek financing, you should know the cash flow statement is the most important document in your loan package. Lenders will assess it carefully to see if your anticipated collections and payments seem accurate and realistic.

Next- Projections/forecasts  - Month by Month - Seasonal Adjustments


About the author

Marjorie Weber

Marjorie Weber has been educating entrepreneurs and guiding them in their search for capital for the past 16 years: combining business training programs with one-on-one mentoring. Marj is currently the executive director of Primed2Grow, a Miami based consultantcy. Most recently Maj was a financial advisor for Florida SBDC at FIU. She was Chair of SCORE Miami Dade from 2010 to 2014. She also serves as an advisor to the Goldman Sachs 10,000 Small Business Program and the SBA Emerging Leaders Program and provides training for Veterans seeking an entrepreneurial path upon retirement from the service. She has  facilitated workshops under the auspices of Miami Bayside Foundation, Little Haiti Cultural Center and .local banks. She commenced her career as a real estate investment banker in New York and Miami..She uses these long term relationships to assist her clients in accessing capital. She knows both the process and the people and has assisted in providing financing for hundreds of businesses in Miami Dade.