Cash Flow Management Guide

6. Cash Flow Projection Template

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Business Finance

Cash Flow Projection Template

Nov 15, 2022 • 4 min read
cash flow forecasting
Table of Contents

      A cash flow projection template is a tool that can organize your company’s cash inflows and outflows over a given period. You can use it to predict your cash balance at a point in the future and inform your business decisions.

      Let’s further explore why cash flow projection templates matter and how they work and then look at some examples.

      Why is a cash flow projection template important?

      Your business cash flow refers to the impact of your company’s various activities on its cash balance. It’s an essential metric for assessing your financial strength, as sustained negative cash flows are one of the leading causes of business failure.

      Notably, your net cash flow is significantly different from your net income. Cash flow includes the effects of investing and financing activities while ignoring accounts payable and receivable.

      As a result, you can’t assume that your company has a healthy cash flow just because your income statement indicates that you’re profitable. You can run out of cash while having a healthy gross revenue and net income.

      If you don’t pay enough attention to your cash flows, you may be surprised to find one day that you don’t have sufficient liquidity to meet your financial obligations. That can damage your company’s finances, reputation, and credit score.

      The primary reason to create a cash flow projection template is to avoid that kind of disaster. It can help you estimate your future cash balances and identify a potential cash deficit well before it happens.

      That way, you can take steps to prevent the problem by reducing your cash outflows or increasing your cash inflows.

      For example, say it’s January 1, and you want to determine whether you’ll have sufficient working capital for the first quarter.

      You plug your current cash balance, fixed monthly payments, expected cash receipts, and budgeted expenses into a cash flow projection template for the next three months.

      It indicates that your cash reserves will be dangerously low by the end of February, so you apply for a business credit card to obtain additional working capital.

      How to build a cash flow projection template.

      A cash flow projection template is a tool that aggregates your cash inflows and outflows to calculate a subsequent cash balance. You can design them in many ways, depending on your business activities, circumstances, and forecasting goals.

      For example, say you have a new small business and want to focus on getting out of the red and reaching positive net cash flows. Therefore, you create a simple cash flow template with minimal details and a short time horizon like the one below.

      The template would help you make quick and easy cash flow projections, gauge your progress toward positive net cash flows, and confirm that you have the cash to meet your upcoming obligations.

      However, it wouldn’t be much good for long-term financial planning. If you were a well-established business owner looking to increase spending and scale aggressively, you might create a more detailed projection template with a longer time horizon.

      For example, you might make one like the following for the entire year.

      Not only would that let you make your projections with greater accuracy, but you could also track your cash flows over multiple months simultaneously.

      As the year progresses, you could use the variances between your actual and project results to improve the accuracy of each cash flow forecast.

      Manage your finances with confidence.

      View loan offers, receive payments, and track your cash flow with the Lendio mobile app.

      About the author
      Nick Gallo, CPA

      Nick Gallo is a Certified Public Accountant and content marketer for the financial industry. He has been an auditor of international companies and a tax strategist for real estate investors. He now writes articles on personal and corporate finance, accounting and tax matters, and entrepreneurship.

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