Cash Flow Forecasting

What is a Cash Flow Forecast?

Cash flow forecasting can be defined as the flow of financial sources in the future for your business during a given period. Here the cash in incorporates receipts, taxes and any money contributed by the owner into his or her business. Whereas cash out refers to any amount paid as wages, paid suppliers, etc.

Cash flow forecast is not a very difficult task, but when undertaken manually, can lead to a lot of time consumption. Every organization needs to develop a plan for a short-term cash flow as well as a long-term cash flow.

For short-term cash flows, one needs to make a list of all the expenses one will be making, taking into account how much you spend on the resources required for the manufacturing of the products or keeping up with the services, the travelling charges, the charges as are necessary for paying the labourers and the professional charges too. All the receipts need to be kept in proper condition and be accounted for. The cashout forecast needs to be made similarly.

The same principle needs to be applied to long-term forecasting too. The annual budget and the balance sheet will help you maintain a good cash flow. Estimating an accurate cash flow is not possible, so probable measures are taken. Excel is an outstanding and widely used tool for long-term cash flow forecasting. A realistic forecast of cash position helps you maintain a better position in the market.

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