How to build a short-term cashflow forecast for your business (and a free template)
As your business begins to open back up, understanding short-term cashflow is more important than ever. Lucky for you, we've put together a simple Google Sheet template to help you build a short-term forecast (more below).
A short-term cash flow forecast is a forecast of the cash you have, what you expect to receive over the next few weeks or months, and what you expect to pay out.
The income statement and balance sheet you typically receive from your accountant tell a high-level story, but when we talk about short-term forecasting, we're more concerned with the individual transactions coming in and out of your bank account over the next 10-12 weeks. It's a more granular analysis. Our template below references months, but you can easily use it for weeks too.
Here are five steps to building a short-term forecast (and a free template)
Start with your cash balance, opening balance sheet, and customer payment schedule. Make sure to reconcile your opening cash balance with your actual bank balance, sometimes these can be misleading depending on when your books were completed. Use what information you have to map out what customers owe you money, and what creditors you owe money in the short-term.
Pro tip: Make sure to take into account any special agreements you have considering the pandemic.Include other receipts or payments you know happen every few weeks. These may include, tax-related refunds, tax-related payments, cash from asset sales, rent payments, payroll, interest payments, etc.
Pro tip: prioritize the suppliers you need to pay based on your business, don't just listen to the squeaky wheel.Estimate payments from future sales or known purchases. Take a look at your recurring contracts to understand when that payment will hit your bank account. Consider cost of goods payments you are scheduled to make. Double check you haven't left anything out from step 1.
Double check hidden charges. Often these are technology fees you or a team member subscribed to that charge your account automatically, like marketing tools. Check last-month's bank receipts to be sure.
Reality-check your output. Take a look at the trend for the next 12 months/weeks. Does it make sense? Did you expect something very different? What's missing?
Pro-tip: Variance analysis is key here, as you build forecasts, track them against your actual performance. This way you can improve in the future.
Download our free cash flow forecast template
We put together this free template to help you walk through your short-term forecast, but one of the most important things to do is update this regularly and compare it to your actual performance.
