Like a weather forecast, a cash flow forecast hinges on keeping your eye on conditions and preparing for what’s ahead.
For small- and medium-sized businesses, a cash flow forecast helps you anticipate the stormy days – and the potential dip in available cash that comes with them. And it guides you on how, and when, to use the extra funds that come during sunny seasons.
By understanding a few basic rules, you can create a forecast that can help your organization navigate the inevitable fluctuations in cash flow that can happen over the course of the year.
When coupled with a cash flow analysis and profit and loss forecast, a cash flow forecast can help provide a more complete picture of your organization’s economic outlook.
Each of these financial analyses provides different information about your business.
Although it uses similar information, a cash flow forecast provides separate insight, such as:
These models have real-world significance for an organization. Without a plan, any business can quickly become insolvent. With a cash flow forecast, you can better support your organization’s long-term sustainability and growth strategy. You’ll also reassue investors your organization is prepared and will remain financially stable even in the face of unpredictable financial storms.
Several software-based solutions provide a straightforward approach to creating a cash flow forecast. The software replaces cumbersome spreadsheets – you simply input your organization’s economic data and the program does the rest.
Some popular business accounting tools, like QuickBooks, include basic functionality for forecasting. Or, you may choose one of the dozens of other browser-based tools available.
Follow these best practices to create a valuable forecast:
Forecasts should show you how much money you’ll need to weather the changing cycles of business. In some years, you may be able to save up enough to maintain operations when cash flow is limited. However, unexpected events – within your organization and the larger community – can make it impossible to save up those funds. A cash flow forecast can help you determine whether a specific scenario will significantly limit your operating capital.
In your planning, consider which kind of financing solution best meets your needs so you have the cash to keep growing. Here are some additional resources to help you grow.
On its own, a cash flow forecast can help your organization anticipate its upcoming financial reality. Coupled with other financial tools, a cash flow forecast empowers your organization with the information it needs to create a financial strategy, borrow wisely, and weather down cycles.
We'll translate the most important information for your browsing, shopping, and communications. Our translations are provided for your convenience. The English version of business.amazon.com, including our Conditions of Use, is the definitive version. Learn more
More languages are available from other Amazon websites.