Debitoor Dictionary

Accounting terms explained simply

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  1. Budget
  2. Accounts payable
  3. Accounts receivable
  4. Cash flow
  5. Assets

Cash flow forecast - What is a cash flow forecast?

A cash flow forecast aims to provide a business with an estimate of incoming and outgoing cash over the course of a given time period

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Also called ‘cash flow projection’, the cash flow forecast is conducted by a business with the intention of determining the expected income and costs that the business will face over the time period specified in the forecast.

Why create a cash flow forecast

Businesses will create a cash flow forecast for an upcoming time period. In the forecast, a time period will be determined (usually the next quarter, for example), for which a projection of the anticipated transactions will be plotted.

The cash flow forecast helps to predict the financial condition of a company over the specified period of time. These forecasts are generally based on previous conditions, cash flow, and forecasts.

Parts of a cash flow forecast

The forecast, focusing on incoming and outgoing cash flow is often broken down into different sections to better pinpoint the expected amounts for each particular section. Cash flow forecasts are typically divided into sections such as:



  • Payments to suppliers
  • Daily cost of operations
  • Loan payments
  • Employee costs
  • Accounts payable

The categories will vary depending on the business. Small businesses might have fewer categories than larger corporations, and specialised industries might also have other categories that are important to consider.

How cash flow forecasts help a business

Cash flow forecasts are useful in developing a reasonable budget and whether any new loans will be necessary, or how much can be paid back to existing loans.

The forecast is also useful throughout the period for which it is created as a useful reference for making financial decisions involving the business. Cash flow forecasts are based on when cash is actually expected to be received/paid.

Managing cash flow with accounting software

The easiest way to stay on top of the incoming and outgoing cash flow for your business is with online accounting & invoicing software like Debitoor. Enter payments on invoices, upload expenses, and balance your accounts all in one place.