• pt-br
  • en
  • es
  • fr
  • polaind


Learn how to prepare a cash flow forecast for your company

Managing a company requires expertise. Normally, the person that fulfills this function has sought this preparation for this position in college, for example. Other relevant sources of information are journals and magazines. However, nothing is more useful to an entrepreneur than evaluating the numbers of the business itself. That’s why preparing a cash flow forecast is so important.  

A cash flow forecast is an interesting study that can help an entrepreneur make correct financial decisions quickly. It’s natural that companies pay attention to their cash flow, but by organizing this information in a better manner, they’re less likely to be susceptible to the influence of external factors.  

Interested in this subject? Then this article will help you gain a better understanding of it. Let’s begin! 

Cash flow forecast: what purpose does it serve? 

The goal of a cash flow forecast is to provide a businessperson with a future panorama of the business, focusing on the short term. This way the company’s controllers will know during which periods the amount of cash exiting the company exceeds the amount of cash entering it.  

One of the many uses of this control is organizing the payment of bills so that the financial process doesn’t harm the company’s cash flow, putting the company’s investments in danger. 

Over the long term, a cash flow forecast helps a company plan its financial activities, reveals if it has liquidity, and improves its management of working capital. 

Cash flow forecast: how do you prepare it? 

It’s possible to prepare a cash flow forecast at any time during a company’s existence. Ideally, this type of planning should begin when the company is founded, because it enables the entrepreneur to evaluate investments in a more secure manner.  

The first step is to define the value of the company’s initial balance. Then you should identify the fixed and variable costs. One tip is to control all the money that exits the company, however small the amounts may be, because if they are recurring, they will end up adding up to large amounts over time.  

If the company has debts, it’s important to include them in the variable costs, identifying the applicable interest rates. If the company plans to take out a loan, this can also be included in the study, even if the loan hasn’t been taken out yet. This is important to discover whether the transaction is viable. 

Identify the amounts that will be entering the company’s coffers as well as the period in which these deposits will occur. This way, the company will understand when it will have capital available and what the expected deposits will be.  

This study can also include other information depending on the company’s situation. It’s important to stress that these are forecasts. They don’t take into account the bankruptcy of a client, for example.  

Even so, it’s highly recommended that you have a cash flow forecast, because this way your company won’t be caught by surprise by external factors, and financial decisions can be made with greater confidence.  

One important tip is to modernize the collection of this data to reduce the frequency of errors. Don’t dream of preparing this study with pen and paper. Creating an Excel worksheet is also out of date. The ideal is to work with specialized software to perform these functions. 

Now that you understand what a cash flow forecast is, make sure you sign up for our newsletter to continue receiving articles about the business world by email. It’s free! 

Talk to MyABCM

Request a demo bellow and know what MyABCM can do for your company.

If you are interested in MyABCM solutions and need more information, please send us a message.