How to Forecast Cash for a Small Business
When running a small business, profit alone doesn’t guarantee survival. The real question is: Do you have enough cash on hand to pay bills, employees, and suppliers—while still investing in growth?
That’s where a cash flow forecast comes in. It helps you see when money will enter and leave your business, so you can plan ahead, avoid shortfalls, and grow with confidence.
Step 1: Know the Difference Between Profit and Cash
Your profit & loss (P&L) statement shows revenue and expenses, but not always when money changes hands.
A client might sign a $10,000 contract, but only pay in 30 days.
You might have upfront costs for materials long before you receive customer payments.
Cash forecasting looks at timing, not just totals.
Step 2: Identify Cash Inflows
List every source of expected cash:
Customer payments (consider payment terms like net 30 or net 60)
Loan proceeds or credit line access
Owner contributions or investments
Seasonal sales spikes
👉 Be conservative. Assume delays where they often happen (late-paying customers are common).
Step 3: Identify Cash Outflows
Next, track when money will leave your bank account:
Payroll and contractor payments
Rent, utilities, insurance
Supplier/vendor invoices
Loan or credit card payments
Taxes (monthly, quarterly, annual)
One-time purchases (equipment, software)
Step 4: Build Your Forecast Timeline
Most small businesses begin with a monthly cash flow forecast that spans 12 months. For high-growth or tight-cash businesses, a weekly forecast is better.
In a simple spreadsheet, list inflows and outflows by month. Subtract outflows from inflows to see your net cash change—and project your ending cash balance.
Step 5: Monitor and Adjust
A forecast isn’t one-and-done. Update it regularly:
Compare forecast vs. actual each month
Adjust for new contracts, delayed payments, or unexpected expenses
Use it to decide when to invest in hiring, equipment, or marketing
Step 6: Use Forecasts for Smart Growth
Cash flow forecasting doesn’t just protect against crises—it supports sustainable growth. Use your forecast to:
Time big purchases when cash is strong
Negotiate better payment terms with vendors
Spot when you’ll need financing before it’s urgent
Build a cash reserve for stability
✅ Final Takeaway
Cash is the fuel that powers your business. By forecasting when money will come in and go out, you’ll have the clarity to make smarter decisions, avoid sleepless nights, and grow sustainably.
Need help setting up a cash flow forecast that actually works? I help small businesses turn numbers into strategy.
📧 info@dmgaccounting.com | 🌐 dmgaccounting.com