Forecasting and reporting your cash flow

Plan for the near future and avoid nasty surprises by using monthly reporting and forecasts to track your cash flow.

Start with our planning worksheet.

If your business is new, start by forecasting your money movements for the next 12 months. If you're already up and running you'll have data to base your projections on. There are four steps to go through:

1. Forecast your sales income

How do your think your sales will pan out over the next 12 months? Consider the customers you're targeting, the payment terms you offer, as well as the wider economy.

If you've been in business long enough to have sales figures for the previous year, use them as a starting point.

Over the year you'll see how accurate your figures are. Use this information to adjust the rest of your forecast.

2. Estimate other cash inflows

Other than sales, what money do you expect to receive? You might include:

  • loans being paid back to you
  • asset sales
  • grants or other funding
  • GST rebates or tax refunds
  • royalties, franchise fees or license fees.

3. Detail your estimated expenses

By calculating your outgoing cash you see what it costs to sell your goods. As you make more sales, use your sales numbers to adjust your forecast.

Include all of your expenses, including:

  • administration
  • operating costs
  • asset purchases
  • loan repayments
  • bank fees
  • payments to the owner(s)
  • investment of surplus funds

4. Combine your data into a cash flow forecast

Start with your opening balance – the cash you have on hand now – then add your incoming cash and subtract your outgoing cash. Usually you'd track your cash flow by the month. Your "closing cash balance" one month becomes your "opening cash balance" the next.

Divide your cash flow forecast into three groups:

  • Operating activities. Day-to-day cash movements like sales, stock movements and employee payments.
  • Investment. This includes buying and selling fixed assets like plant, equipment and property, as well as financial investments.
  • Financing activities. This is money used to finance the business. It could be borrowings (and repayments) or money put in by you or the owner.