What is a cashflow forecast?

Definition of cashflow forecast

A cashflow forecast is a plan that shows how much money a business expects to receive in, and pay out, over a given period of time.

The business will usually start by planning how much it expects to earn in sales, then how much it expects to spend in day-to-day running costs, and finally how much it expects to receive from other sources (such as a bank loan) and pay for other costs (such as buying new equipment). Check out our article on how to make a cashflow forecast for more information on the process and benefits of financial forecasting for small businesses.

A cashflow forecast will not match a profit forecast because profit is based on when income is earned and when costs are incurred, whereas a cashflow forecast is based on when income is received and costs are paid for.

Positive and negative cashflow

If a business expects to receive more than it spends, it is said to be cash positive, or to have positive cashflow. If it expects to spend more than it earns, it is said to be cash negative, or to have a negative cashflow.

How to keep track of your business's cashflow

As tracking cashflow is a top priority for any business, FreeAgent's cashflow view gives you a monthly snapshot of the money coming in and going out of your business, so you know at a glance if you're making or burning cash.