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Budgeted Cash Flow Forecast

WHAT is it: A cash flow budget predicts your business's ability to take in more cash than it pays out. This will give you some indication of your business's ability to create the resources necessary for expansion, or its ability to support you, the business owner. The cash flow budget can also predict your business's cash flow gaps--periods when cash outflows exceed cash inflows when combined with your cash reserves.

HOW it works: You can take cash flow management steps to ensure that the gaps are closed, or at least narrowed, when they are predicted early. These steps might include lowering your investment in accounts receivable or inventory, or looking to outside sources of cash, such as a short-term loan, to fill the cash flow gaps.

  • Preparing a cash flow budget involves four steps:

  • Preparing a sales forecast

  • Projecting your anticipated cash inflows

  • Projecting your anticipated cash outflows

WHY execute the process: Preparing your cash flow budget will help you project cash inflows and outflows over a specific period of time. Learn how to create a sales forecast for your business with this invaluable budget. This serves as a useful proiection of your business's cash inflows and outflows over a certain period of time. A typical cash flow budget predicts the anticipated cash receipts and disbursements of a business on a month-to-month basis.

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