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Last edited 24 Sep 2020
Cash flow forecast
A cash flow forecast is an important business tool that establishes whether there is enough cash to run a business or to expand it. It will also reveal when more cash is going out of the business, than in.
Building a cash flow forecast allows an evaluation of cash resources that are required and when they are required. Business owners can identify likely future gaps in funding and plan for those gaps accordingly. It is an important tool for predicting the continuing financial health of the business.
Additionally, cash flow models enable business owners to assess 'what if' scenarios by changing key variables to see how vulnerable the business is to price changes, staffing levels, exchange or interest rate movements, and other key drivers.
In larger organisations the cash flow projection can be integrated with day-to-day operations. This can help identify what production is necessary, what resourcing is required and can provide an assessment of the capacity within a business.
 What should be included in a cash flow forecast?
 Likely sales
To start, estimate likely sales for the weeks or months covered by the cash flow forecast. The easiest way to do this is to look at sales history from the last few years. Take note of any seasonal patterns, or the impact of promotions in those months.
When estimating these sales, it’s important to take any future plans into consideration. Take a look at the current state of the market and any emerging trends, as these may have an impact on the business. Things to consider include any promotional activity or product launches, and the activity of competitors too.
 Related articles on Designing Buildings Wiki
- Balance sheet.
- Business case.
- Cash flow.
- Cash flow statement.
- Construction contract.
- Construction organisations and strategy.
- Cost plans.
- Earned value.
- Fee forecasting.
- Financial hedging.
- Financial management tools.
- Resource forecasting.
- The Late Payment of Commercial Debts Regulations 2013.
- Working capital.
- Whole life costs.
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