Cash Flow Projections

Quarterly Projection

The Goal of the Cash Flow forecasting is to determine deficiencies or excesses in cash flow that may occur in your business during the periods for which the projection is prepared.

Whenever cash flow deficiencies are revealed, your financial plans must be altered until a proper cash balance is attained.

The cash flow management system put in place is one of the most detailed and comprehensive control systems that can be found in any small business.

This spreadsheet is carefully managed by the bookkeeper of the company and reviewed on almost a daily basis by the owner.  It starts with the current cash balance, projects out the receivables coming in on a weekly basis and then lists all the recurring expenses, debt payments, and payables. This system allows you to maintain a positive cash balance at all times while still making all payments on a timely basis to take advantage of vendor discounts.



•           A cash flow projection is a forecast of cash funds that you anticipate receiving and distributing over a given period of time with the anticipated cash position at specified times during the period being projected.

•           Although cash flow forecasts may be developed for any period of time, I suggest that you forecast and monitor cash flow on a weekly basis for the next 12 months. You may then decide to forecast your cash flow on a biweekly basis if you have established your ability to predict your cash position consistently.

If you project a positive cash position, you must analyze why you are in such a fortunate state before you spend the excess cash. Some questions to consider are:

•          Is your company at the top of a business cycle (e.g. Christmas for a retailer)?

•          Are you current on all of your debts?

•          Have you paid your taxes, including estimated taxes?

•          While you are deciding, are those idle funds providing a reasonable rate of return (e.g. interest)? Your objective is to develop a well-managed cash flow plan that will allow you to predict when cash will be needed to sustain operations as well as allowing you to disburse your money prudently.

•          Your projections become more useful when the estimated information can be compared with actual data. You should utilize your cash flow projections to set new goals and plan operations for more profit.

•          In summary, the cash flow position for each period should be adequate to meet the cash requirements of that period. When you project a negative cash position, cash expenditures should be reduced temporarily (possibly by delaying payments on certain line items and/or to particular vendors in the Accounts Payable schedule) or cash must be injected into the business.

Whenever cash flow deficiencies are revealed, your financial plans must be altered until a proper cash balance is attained. Some alternatives for you to consider when you project a temporary negative cash flow are:

•             Accelerate collections of your accounts receivable

•             Increase your sales (using break-even analysis)

•             Decrease your expenses

•             Defer payments as necessary and prudent

•             Obtain loans from financial institutions, including lines of credit

•             Provide cash from your personal funds

•             Secure funds from your family and/or friends

Unfortunately, lenders tend to loan money to companies that don’t need money over those that really need a loan. They also tend to charge higher interest rates to their customers that marginally qualify. Therefore, accurate cash flow forecasting is imperative to predict when money will be needed to enhance your ability to obtain a loan and to obtain the lowest interest rate possible.


NOTE:  This Estimating Tool requires you to have Microsoft Excel on your computer.

For instructions to use this tool click link:  Cash Flow Projections