Running a business means constantly making financial decisions. Can you afford to hire someone? Is there enough cash for a new piece of equipment? Can you increase your marketing budget this month?
A cash flow forecasting template can make these decisions easier by showing what could happen to your cash over the next few weeks or months.
A cash flow forecast is not a guarantee. It is an estimate based on what you know about your business right now. When you update it regularly, it can give you an early warning that cash may become tight before the problem reaches your bank account.
This is important because making a sale does not necessarily mean you have the cash from that sale. You might send a client an invoice for R50 000 today, but only receive the payment in 30, 60 or even 90 days. During that time, salaries, rent, suppliers, software subscriptions and tax still need to be paid. A cash flow forecast helps you see those timing gaps.
What is a Cash Flow Forecasting Template?
A cash flow forecasting template is a spreadsheet or digital tool that helps you estimate how much money will enter and leave your business over a future period.
A basic cash flow projection template will usually include:
- Opening cash balance
- Expected cash inflows
- Expected cash outflows
- Net cash flow
- Closing cash balance
The calculation itself is straightforward:
Opening cash balance + cash inflows − cash outflows = closing cash balance
The maths is the easy part. The real value of the forecast comes from using realistic amounts and, importantly, realistic dates. A cash flow statement looks at what has already happened. A cash flow forecast looks ahead and estimates how expected inflows and outflows could affect the cash available to the business.
Start With the Cash You Actually Have
Before you start adding future sales and expenses, check how much money is currently available to the business. Look at your bank balance and account for any transactions that have not yet cleared. If the business has several accounts, include the money that is genuinely available to cover operating costs.
Do not begin with how much you expect to make this month. Begin with what is already there. For example, imagine a small digital agency starts the month with R85 000 in available cash.
It expects:
- R100 000 in client payments
- R20 000 from a new project
- R75 000 in salaries
- R15 000 in software and subscriptions
- R20 000 in supplier payments
- R10 000 in marketing costs
- R8 000 in other expenses
Looking at the totals alone does not tell the whole story.
The agency also needs to know when that R120 000 in expected income will arrive and when each expense needs to be paid. That is where the cash flow forecasting template becomes useful. It turns a large monthly figure into a timeline of money coming in and going out.
Add Cash Inflows Based on When You Expect to Be Paid
Cash flow forecasts can easily become too optimistic when you’re not careful. If you invoice a customer today, that does not mean you have the money today.
For example, suppose you invoice a client R30 000 on 5 October and give them 30-day payment terms. Adding the R30 000 to your available cash on 5 October would create an inaccurate picture of your position.
Instead, enter the payment around the date you genuinely expect it to arrive.
You can make this estimate even more realistic by looking at how the client has paid you in the past. Good cash flow forecasting practice is to track when money actually reaches your bank account and use customer payment patterns to improve future estimates.
Include All Major Cash Outflows
Once your expected income is in the forecast, add the money you expect to spend.
Start with regular costs such as:
- Salaries and wages
- Rent
- Insurance
- Software
- Loan repayments
- Internet and phone costs
Then add expenses that change from month to month, including:
- Stock
- Advertising
- Freelancers
- Equipment
- Travel
- Repairs
- Tax payments
One mistake businesses can make is only forecasting their normal monthly expenses. Not every important expense happens monthly. You might have an annual software subscription coming up, equipment that needs replacing or a large tax payment due in a few months. Leaving these costs out can make your future cash position look healthier than it really is.
For South African businesses, tax deadlines also need to form part of the forecast. SARS explains that provisional tax is paid during the year based on estimated taxable income, with compulsory payment periods that businesses need to plan for.
One practical way to catch other irregular expenses is to go through your bank statements from the previous year. Look for large or one-off payments that could come up again.
Choose a Forecasting Period That Makes Sense
The right time frame depends on the question you are trying to answer. A 13-week cash flow forecast, for example, gives you a closer look at your immediate cash position.
It can help you answer practical questions such as:
- Will we have enough cash for payroll in three weeks?
- Can this supplier be paid next month?
- Can we afford to launch this campaign now?
If you are planning further ahead, a six or 12-month forecast may be more useful.
Short-term cash flow forecasts can generally be more detailed because you know more about the payments and expenses coming up soon. Longer forecasts are useful for bigger decisions such as expansion, hiring or major purchases. The further ahead you forecast, the more assumptions you will need to make.
That does not make a long-term forecast useless. It simply means you need to recognise that the figures are likely to change.
Separate Sales From Actual Cash Receipts
This is a small distinction that can make your cash flow forecast far more useful; remember that revenue is not always cash.
Imagine a consulting business signs three contracts worth R40 000 each. On paper, it has secured R120 000 in revenue. That sounds great. But if those clients will only pay over the next three months, the business does not suddenly have R120 000 available to spend today.
A profit and loss report might show strong sales while the bank account tells a very different story. Your cash flow template should therefore show when you expect the cash to arrive, not simply when the sale was made.
This timing difference is one of the most common challenges in cash flow management, particularly where revenue is recognised before the cash reaches the business.
Compare Your Forecast With What Actually Happened
A forecast becomes much more valuable when you regularly compare it with your actual results. At the end of the week or month, look back at what you expected and what really happened.
Ask yourself:
- Did customers pay when expected?
- Were any expenses higher than planned?
- Did a project take longer than expected?
- Was there a recurring payment we forgot about?
- Did our marketing activity generate cash as quickly as expected?
You will probably start noticing patterns. Maybe you keep forecasting that customers will pay within 30 days, but the real average is closer to 43 days. Once you know that, use 43 days in future forecasts instead of continuing to assume 30.
Regularly comparing cash flow forecasts with actual results can reveal where estimates were too high or too low and help improve the next forecast.
What Happens if Your Forecast Shows a Cash Shortage?
Seeing a negative balance in your forecast can be uncomfortable, but it does not automatically mean the business is in trouble. Instead, it’s a warning and presents an opportunity to investigate.
Start by finding out what is causing the shortage.
It might be:
- A large customer paying late
- A major supplier payment
- A seasonal drop in sales
- A tax bill
- The cost of a new employee
- A large marketing campaign
- New equipment or technology costs
Once you understand where the gap comes from, you can look at your options. That might include following up on unpaid invoices, delaying a non-essential purchase, renegotiating payment terms, adjusting your marketing spend or arranging finance before you urgently need it.
Tax should also be planned before it becomes an urgent cash flow problem. SARS notes that spreading provisional tax payments across the year can reduce the impact of one large tax payment and assist with financial and cash flow planning.
That is one of the biggest advantages of cash flow forecasting. Instead of finding out there is a problem when your account balance is already low, you can see the pressure coming and respond earlier.
