Presented by QuickBooks Capital 

This article is presented in partnership with QuickBooks Capital, helping small businesses access flexible financing when it’s needed most.

Cash flow can make or break your business. While you can survive a few pricing mistakes or marketing missteps, a consistent failure to manage your cash flow often leads to one outcome: running out of money before you can recover.

And it doesn’t take a crisis. A late client payment, an unexpected repair, or a slow sales month can leave you scrambling to cover payroll or expenses.

That’s why cash flow forecasting isn’t optional—it’s essential. With even a simple forecast in place, you can spot gaps early, adjust your spending, and even plan ahead for funding needs before they become emergencies.

We’ll show you how to build a better cash flow forecast and use it to make smarter, more confident business decisions.

What is cash flow forecasting?

A cash flow forecast is a forward-looking estimate of the money your business expects to bring in and spend over a set period of time—usually weekly, monthly, or quarterly.

Done well, forecasting helps you:

  • Spot financial gaps early, before they become problems
  • Time your spending or financing decisions more strategically
  • Plan for growth, like adding staff or launching new marketing campaigns.

For example, if your forecast shows a seasonal slowdown, you’ll know to cut spending or secure a line of credit in advance. If it shows a revenue spike, you can plan how to reinvest that income wisely.

Without forecasting, these decisions become reactive and risky. You might overextend your budget or miss opportunities to grow. But with even a basic forecast in place, you’re working with eyes wide open.

The cash flow forecast formula.

There are two main ways to build a cash flow forecast: the indirect method and the direct method.

  • The indirect method starts with your net income and adjusts for non-cash expenses (like depreciation) and changes in accounts receivable or payable. It’s often used for historical analysis or long-term planning, but can get complex quickly.
  • The direct method is simpler and more intuitive—especially for short-term forecasts. It focuses on actual cash transactions: money coming in, and money going out.

Here’s the basic formula:

Beginning cash balance + Projected Cash Outflows = Ending Cash Balance

Most small business owners benefit from starting with the direct method. And if you’re using Intuit QuickBooks, many of these numbers are already tracked for you, making it easier to generate projections without starting from scratch.

How to forecast accurate cash flow.

A cash flow forecast is only as good as the numbers behind it. To improve the accuracy of your projections—and make smarter financial decisions— focus on these four core habits.

1. Monitor and understand your financial reports.

Don’t just glance at your reports—dig into them! Tools like QuickBooks Online make it easy to access your profit and loss statement, balance sheet, and cash flow statement in just a few clicks. Review them regularly, and make sure you truly understand what they’re telling you.

For example, don’t confuse profit with cash. You might be showing a profit on paper, but have no cash in the bank due to unpaid invoices or upfront expenses. 

2. Know your receivables cycle.

Revenue doesn’t always equal immediate cash. Review how long it typically takes customers to pay you, whether it’s Net 15, Net 30, or longer.

Use this insight to project when cash will actually hit your account. If your forecast reveals a shortfall, plan ahead. You might decide to speed up collections—or look at securing a line of credit to bridge the gap.

Term loans and lines of credit are offered through small business platforms like QuickBooks Capital to their customers leveraging QuickBooks users’ account info.1 These solutions can be quicker and easier to apply for than a financing option from a standalone funder.

3. Treat your budget as a living document.

A budget isn’t something you create once and forget. Revisit it often. Adjust for real-time cash flow changes and reallocate funds as needed.

If expenses spike or revenue dips, your forecast should help you react quickly—whether that means delaying a purchase or tapping into financing.

4. Expect the unexpected.

Most cash flow forecasts fail because they overlook unpredictable costs: an extra payroll cycle, seasonal tax spikes, or an emergency repair.

Build a buffer into your forecast for these surprises. Set aside extra funds for “miscellaneous expenses” and consider maintaining access to working capital just in case. Even if you don’t use it, having it ready can keep a surprise from turning into a setback.

Cash flow forecasting example.

Let’s walk through a simple example using the direct method.

Imagine you run a landscaping business. It’s March 15, and you’re concerned about having enough cash to cover your tax bill due April 15. You decide to create a 30-day forecast to get clarity.

1. Calculate projected cash inflows

  • $2,000 from retainer clients
  • $3,000 payment from a February project (Net 30 terms)
  • $3,000 down payment for an upcoming April project

Total inflows: $8,000

2. Calculate projected cash outflows

  • $500 for advertising
  • $750 for tax prep services
  • $500 for liability payments
  • $1,000 for equipment rental
  • $1,500 for February project labor

Total outflows: $4,750

3. Apply the formula

  • Beginning cash balance: $3,000
    • Inflows: $8,000
    • - Outflows: $4,750
  • Estimated ending balance: $6,250

With your tax bill expected to be $5,000, you have enough to cover it—but not much breathing room. Rather than risk a cash crunch, you decide to explore a business line of credit through QuickBooks Capital to create a safety net for any surprise expenses.

That’s the power of forecasting: instead of reacting to problems, you’re planning ahead and giving yourself options.

Cash flow projection tips.

Forecasting your cash flow isn’t about being perfect—it’s about being prepared. Here are three tips to help you sharpen your projections over time.

1. Look into the past

Your historical financials are a goldmine for predicting future performance. Use reports from tools like QuickBooks Online to identify patterns in revenue, expenses, and seasonality.

Ask: When do payments tend to slow down? What costs spike during certain months? How often do clients pay late? Use those patterns to build more realistic projections.

2. Adjust for what’s ahead

Forecasts shouldn’t just reflect the past—they should factor in your future plans. Are you hiring? Launching a new service? Changing suppliers? These moves will impact your cash flow, so adjust your forecast accordingly. 

For example, if you expect a slower month, you might hold off on upgrades—or explore financing through QuickBooks Capital to stay flexible without draining your reserves.

3. Add a margin of safety

No forecast is flawless. Build in a buffer for the unexpected—a delayed payment, surprise expense, or sales dip. Even a small monthly cushion can prevent a shortfall from becoming a crisis.

Over time, your forecasts will get better. But even early on, the act of forecasting gives you more control, and the ability to make proactive decisions about your business and your capital needs.

You’ve built a forecast—now what?

Forecasting isn’t something you do once a year and forget. To get the most value, turn it into a monthly habit.

At the end of each month, review what you projected vs. what actually happened. Then update your  numbers and add another month to keep a rolling 12-month forecast. This will help you stay agile, spot trends, and make smarter decisions.

As your forecasting gets sharper, you’ll gain more than accuracy. You’ll gain confidence. You’ll be able to plan growth, prepare for slowdowns, and know exactly when to tap into capital.

And when that moment comes, QuickBooks Capital is there to help. With term loans and business lines of credit, you may be eligible to apply for right in your QuickBooks account, you can access funding that matches your forecast—fast, flexible, and on your terms.

Explore your funding options through QuickBooks Capital and stay one step ahead of whatever comes next.

QuickBooks Term Loan and QuickBooks Line of Credit loans are issued by WebBank.

1Subject to eligibility. QuickBooks Online subscription required.

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