Cash flow forecasting is crucial for business owners who want to avoid financial surprises and engage in effective cash flow planning. Even profitable businesses can experience cash shortfalls, making it difficult to cover expenses and pay yourself on time.

The cash flow forecasting process is essential for managing liquidity and making informed decisions. In this article, we’ll explore how to forecast cash flow in just three steps using Jamie Trull’s practical system.

You’ll also learn about her Deluxe Cash Flow Forecast Template—a tool that simplifies forecasting and keeps you on track.

What is Cash Flow Forecasting?

Cash flow forecasting is the process of predicting the future flow of cash into and out of a business over a specific period. It involves estimating cash inflows and outflows to determine your future cash position.

This practice is crucial for managing liquidity, making informed decisions, and avoiding cash flow problems. By forecasting cash flow, businesses can identify potential cash shortfalls, optimize their cash position, and make better decisions about investments and expansion.

Essentially, cash flow forecasting provides a roadmap for your financial future, helping you navigate through both prosperous and challenging times.

Why Cash Flow Forecasting is Essential

Cash flow forecasting allows you to anticipate when money will come in and go out, ensuring you always have enough on hand to cover upcoming expenses.

An accurate cash flow forecast is crucial for optimizing cash positions and aiding in decision-making. Even businesses with steady profits can run into trouble if revenue timing doesn’t align with bills or payroll.

Forecasting offers a clear line of sight into the future, helping you manage spending and avoid running out of money when you need it most.

Step 1: Gather Your Historical Cash Flow Data

The first step is to collect historical data. This isn’t about profitability but about the timing of cash inflows and outflows.

Jamie Trull advises pulling data directly from your bank account statements rather than relying on your profit and loss statement.

Why? Profitability reflects your overall financial health, but cash flow tracks when money actually hits or leaves your account.

For example, you may record a sale in your books, but if the payment hasn’t been received yet, it won’t improve your cash position.

• How to Get Started: Download your bank statements in CSV format to easily review them in a spreadsheet.
• What to Look For: Identify recurring expenses—like rent, insurance, or payroll—and note the exact dates they’re paid.

Step 2: Build Your Cash Flow Forecast

Once you’ve gathered historical data, it’s time to project your cash flow into the future with a cash forecast. Forecasting doesn’t have to be complicated!

Jamie Trull’s method can be done easily in Google Sheets or Excel.

1. Create a Spreadsheet: List each week (or month) as a column and include rows for income, expenses, and your starting balance.
2. Enter Your Starting Balance: This is the amount currently available in your account. Maintaining an accurate cash balance is crucial for understanding your financial position.
3. Forecast Cash Inflows: Add your expected income for each week or month—be conservative if your revenue is unpredictable.
4. List Recurring Expenses: Include known expenses like payroll, rent, credit card payments, and insurance premiums in the appropriate columns.
5. Calculate Your Cash Flow: Subtract total expenses from income to determine if you’ll have enough cash on hand each period.

Quick Tip:

If you want to skip the hassle of setting this up yourself, Jamie Trull offers a Deluxe Cash Flow Forecast Template that includes pre-built categories, formulas, and even personal tracking tools.

Get your copy at jamietrull.com/cashflow and start forecasting today!

Step 3: Monitor and Adjust Your Forecast

Cash flow forecasting isn’t a one-time task—it requires weekly or monthly updates to stay accurate.

As Jamie explains, the further into the future you project, the more adjustments you’ll need to make.

Regularly update your spreadsheet with actual cash flow data, including actual income and expenses, to refine your forecast.

Key Actions:

• Review Weekly: Compare actual cash flow to your forecast and adjust as needed.
• Identify Cash Shortfalls Early: If your forecast shows a shortfall, consider accelerating revenue collection or delaying certain expenses.
• Plan for Uncertainty: It’s smart to be conservative—underestimate income and overestimate expenses to avoid surprises.

Common Challenges in Cash Flow Forecasting

Cash flow forecasting can be tricky, especially for small business owners who might lack the resources or expertise to create accurate forecasts. Here are some common challenges:

• Inaccurate Sales Forecasts: Predicting sales can be tough, particularly for new businesses or those with fluctuating sales patterns. An inaccurate sales forecast can throw off your entire cash flow forecast.
• Accounts Receivable and Payable Management: Managing when you’ll receive payments from customers and when you need to pay suppliers can be complex, especially with varied payment terms.
• Cash Flow Variability: Businesses with seasonal or cyclical sales patterns often experience variable cash flow, making it harder to predict future cash positions.
• Limited Access to Data: Small business owners might not have access to all the necessary data, such as historical sales figures or detailed accounts receivable and payable information, to create accurate forecasts.

Understanding these challenges can help you take proactive steps to mitigate them, ensuring a more accurate and reliable cash flow forecast.

Tools and Techniques for Cash Flow Forecasting

Creating accurate cash flow forecasts doesn’t have to be daunting. Here are some tools and techniques that can help:

• Cash Flow Forecasting Software: Programs like QuickBooks can simplify the forecasting process, offering built-in features to track and predict cash flow.
• Spreadsheets: For small businesses with simpler cash flow patterns, spreadsheets can be a cost-effective way to create forecasts. Tools like Google Sheets or Excel are great for this purpose.
• Cash Flow Forecasting Templates: There are many templates available online that can guide you through the forecasting process, ensuring you don’t miss any critical components. Check out Jamie Trull’s Deluxe Cash Flow Forecast Template.
• Historical Data Analysis: Analyzing past sales data and accounts receivable and payable information can provide valuable insights for future forecasts.
• Industry Benchmarks: Using benchmarks from your industry can help you create more accurate forecasts, especially if your business experiences variable sales patterns.

By leveraging these tools and techniques, you can create accurate cash flow forecasts that help you manage liquidity, make informed decisions, and avoid cash flow problems.

Benefits of Cash Flow Forecasting and Managing Negative Cash Flow

• Avoid Financial Emergencies: Forecasting ensures you can cover bills, payroll, and taxes on time.
• Plan for Growth: Knowing your cash position helps you decide when to reinvest in your business or hire new employees.
• Pay Yourself Confidently: Forecasting removes the guesswork around owner’s draws, so you know exactly how much you can take home.
• Maintain a Healthy Financial Outlook: Calculating a positive cash flow figure by subtracting net outgoings from net income over specific periods is crucial. A positive cash flow figure indicates a surplus of incoming cash compared to expenses, ensuring adequate working capital for business operations.
• Avoid Cash Deficits: Forecasting helps anticipate and mitigate periods of negative cash flow. Understanding the causes and consequences of negative cash flow allows you to implement strategies to avoid cash deficits and ensure smooth business continuity.

Why You Should Use the Deluxe Cash Flow Forecast Template

While you can build your own spreadsheet, Jamie Trull’s Deluxe Cash Flow Forecast Template simplifies the process. This tool includes:

• Pre-set categories for both business and personal tracking.
• Options for daily, weekly, or monthly forecasting.
• Built-in formulas for calculating cash flow and savings goals.

By using this template, you’ll save time and avoid errors, all while gaining valuable insight into your finances.

Grab your template now at jamietrull.com/cashflow.

This is an unedited video transcript. Please excuse any grammatical errors or conversational quirks.

Video Transcript: How to Forecast Your Cash Flow in 3 Easy Steps

Introduction

Are you constantly caught off guard by unexpected expenses, or maybe you end up having too much month at the end of your money?

Imagine opening up your bank account and seeing a negative balance just when you needed it most. Don’t let this nightmare become your reality. Let’s make sure your finances are organized, and that you can predict your cash flow in just three easy steps.

Hi, I’m Jamie Trull, your go-to CPA for small business financial clarity. Today, we’re going to dive into how you can forecast your cash like a pro without expensive software. Stick around until the end, because I’m going to be sharing my most powerful tip for forecasting cash flow at the end of this video.

Step 1: Gather Your Historical Cash Flow Data

When I’m talking about cash flow, I’m not necessarily talking about profitability. Even profitable businesses can struggle with cash flow because cash flow is all about timing. If you have expenses going out before your revenue is coming in, you’re potentially going to run into a cash flow shortfall.

That’s what makes a cash flow forecast so useful—it’s predicting the future. You’re going to look forward so you can avoid surprises, and know how much you can pay yourself and when. No more guessing.

To get started, you need to gather historical data—specifically, cash flow data. Forget your profit and loss statement. Instead, go directly to your bank account, because the timing of when revenue and expenses hit can vary due to accounting practices.

Cash flow reflects what actually enters and leaves your account.

• Tip: Download your bank statement as a CSV file. This will let you organize it in a spreadsheet format.
• Review your transactions to identify recurring payments, whether monthly, quarterly, or annually. Make a note of their amounts and payment dates.

For example, if you notice that insurance payments happen every January 15th and July 15th, note that down. This will help you remember and prepare for when those payments are due.

Also, track credit card payments based on when you pay your card, not when you make a purchase. The expense hits your cash flow when the credit card payment is made, not when the charge appears. This makes it much easier to organize your forecast.

Step 2: Build Your Cash Flow Forecast

This might sound complicated, but I promise it’s easier than you think. You can do it in Google Sheets, Excel, or any spreadsheet software you prefer. Here’s a quick guide to setting it up:

1. Start with your bank balance: Enter your current bank balance as the starting point.
2. Forecast your income: List the expected income categories (like sales, affiliate revenue, or service fees).
3. Project recurring expenses: Add known costs like rent, payroll, or credit card payments, and place them under the appropriate week or month.

Use weekly tracking if you want a detailed view, but monthly tracking might work better if cash shortfalls aren’t frequent.

You can carry over your formulas across columns for each period, and adjust the forecast as needed.

This forecast helps you plan by showing exactly how much cash will be left at the end of each week or month—before you take any owner draws.

Example of Forecast Adjustments

Let’s say you plan to buy $10,000 worth of inventory this month. Based on your cash flow projection, you see that you’ll have only $300 left afterward.

That’s not enough to cover payroll or other upcoming expenses, so you adjust by either delaying the purchase or buying only part of the inventory.

This simple projection prevents you from making costly mistakes and helps ensure that you get paid on time, instead of taking less owner’s draw because funds run low.

Step 3: Monitor and Adjust Regularly

Forecasting isn’t a one-and-done task. As time progresses, you’ll need to monitor and adjust your forecast. I recommend updating your cash flow every week to compare actual results with your projections.

• Adjust your income and expense forecasts: The closer you are to the actual dates, the more accurate your predictions will be.
• Err on the conservative side: Assume lower income and higher expenses to avoid surprises.

I spend less than 10 minutes a week reviewing and updating my forecast.

If I miss a week, I use a bank override feature in my cash flow tool to true up the balance and adjust going forward.

Get the Deluxe Cash Flow Forecast Template

If you don’t want to build a forecast from scratch, I’ve got you covered!

My Deluxe Cash Flow Forecast Template is ready to use. It includes both personal and business cash flow tracking tools, with options for daily, weekly, or monthly tracking.

With this template, you’ll be able to:

• Plan ahead for recurring expenses and owner’s draws.
• Monitor your personal savings goals alongside business goals.
• Adjust easily to meet both short-term and long-term needs.

Grab your template at jamietrull.com/cashflow and start forecasting like a pro.

Conclusion

Cash flow forecasting is one of the most valuable tools in your business toolkit. It gives you the insight to plan ahead, avoid surprises, and ensure you can meet your goals.

With regular updates and adjustments, you’ll build financial stability that benefits both your business and personal finances.

And if you’re ready to simplify the process, download my Deluxe Cash Flow Forecast Template now at jamietrull.com/cashflow.

Let’s take the guesswork out of cash flow and set you up for success!