How to forecast cash flow

If cash is the lifeblood of a business, the cash flow forecast is like a heart rate monitor.

It’s one of the most useful benchmarking tools available to small business owners, because you can compare your forecasts with the actual performance of your business to track your progress or identify areas that need work.

However, cash flow forecasts are entirely dependent on the quality of the information they’re based on. If data included in them is simply based on snap judgements and assumptions, the cash flow forecast itself will be of little value.

You need to base your sales and cost projections on detailed analysis, whether you have a sales track record to fall back on or you’re researching the market to find the evidence you need.