Ever wondered why some businesses flourish while others struggle to stay afloat, especially in the face of economic uncertainties? 

The answer often lies in one fundamental aspect: cash flow management. 

Did you know? 

As the Small Business Administration reported, 82% of businesses face failure due to poor cash flow management.

Now, the pivotal question arises: Can you master the art of cash flow forecasting to secure your business’s financial future?

In this comprehensive guide, we’ll take you through a step-by-step journey, unraveling the intricacies of preparing a Cash Flow Forecast. 

Whether you’re a seasoned entrepreneur or embarking on a startup venture, understanding and controlling the cash flow within your organization can be a game-changer.

Join us as we delve into the essentials, providing you with the knowledge and tools needed to survive and thrive in the ever-evolving world of commerce. 

Let’s get started. 

What Is The Cash Flow Forecast?          

Cash flow forecasts predict a company’s income and expenses during a specific period. A cash flow forecast is not just an income statement.

It predicts how much money will come in and out of your business during a given time period, including sources of revenue and where your money will be spent.

It includes fixed payments (like rent or loan repayments) as well as variable payments (like stock inventory), capital expenditure, and cash needed for working capital.

It predicts whether a company will have enough money to continue operating its current business plan or whether more funding needs to be raised via loans or new investors.

To sum up, a cash flow forecast is an essential business tool that provides detailed insight into how much cash you will have at your disposal in order to sustain your business.

If not prepared correctly, it can be detrimental and misleading rather than helpful. In other words, it can make or break your business.

Now let’s discuss the 

Ten Steps To Follow To Prepare Your Cash Flow Forecast 

Step 1: Analyze Your Current Cash Flow

Analyze Your Current Cash Flow

Before predicting your future cash flow, you need to be aware of your current cash flow. 

An essential part of financial planning is understanding where your money comes from and goes each month, so take a few minutes to analyze accounts payable & receivable and understand what drives cash in or out of your business account.

In this analysis, leverage Invoicera’s AR & AP Management feature. This allows you to manage accounts receivable and payable in a single dashboard seamlessly. 

By centralizing these financial aspects, you gain a comprehensive view of your cash flow dynamics, enabling a more informed understanding of your current financial situation.

This will give you an understanding of the limits for how much cash you will have on hand at any given time in any month. 

It will show you how much debt financing may be available for working capital versus additional capital expenditures.

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Step 2: Forecast Future Receivables

If you generate invoices regularly, you can forecast receivables by applying your historical ratio of accounts receivable to accounts payable. This will give you a view of what your business’s future credit line might look like, and you can use that number in determining how much cash flow will be available when it comes time to pay bills.

Also, consider using invoice software, which can help forecast invoices based on past performance and projected growth. Invoice software offers detailed reports on account activity and connects directly to online payment services, so there’s no need to enter data manually or check to process.

With an online invoice generator, you can take advantage of tools for accepting electronic payments from anywhere at any time.

Step 3: Forecast Future Payables

Forecast Future Payables

If you’re anticipating additional invoices that may come due in three months, note them down. By projecting these future payables, you can better determine how much cash will be needed and when. The faster your company brings in receivables, the less money it needs upfront to pay its bills as they come due.

You should also consider whether any enormous expenses are coming up, for example, if you need new machines or equipment and build them into your forecast.

Once again, accountants do all of these calculations for businesses every day, but sometimes we don’t consider what those costs might mean to our business finances until we start calculating our forecasts ourselves.

Step 4: Calculate Your Working Capital Needs

You need working capital to meet your cash obligations and fund growth. It’s also essential to gauge your company’s financial health.

Consider Invoicera’s Multi-Currency & Multi-Lingual feature when calculating your working capital needs. 

This allows you to choose from global languages and currencies, facilitating international transactions.

By incorporating this feature, you enhance the flexibility of your working capital, catering to diverse financial scenarios and supporting global business endeavors.

The ratio of current assets (which includes cash, inventory, accounts receivable, and so on) divided by current liabilities (such as accounts payable, accrued expenses, and short-term loans from investors or other entities) will tell you how much working capital your business has available to support.




Step 5: Balance Sheet Analysis

Balance Sheet Analysis

In addition to your income statement, we also suggest you perform a balance sheet analysis on your business. A balance sheet is an overview of your assets and liabilities as they stand at a given point in time, often at year-end, and will serve as an excellent reality check when preparing your cash flow forecast.

It’s relatively simple to perform. You need to add all your company’s assets (i.e., all things that can be converted into cash) and subtract any debt obligations or other liabilities (i.e., what must be paid with cash). The resulting figure shows how much cash your company has available at that particular time.

This number should be compared with each month’s expected revenue figure over twelve months and compared to your cash expenses for working capital needs.

Remember that operating expenses significantly impact cash flow, and capital expenditures have no immediate effect on cash flows.

Step 6: Develop Statement Of Cash Flows

The statement of cash flows is one of the most important financial statements you can use to help manage your business. 

The statement of cash flows provides information about how money flows in and out of your business, from operations, financing, investing, and financing. It lists each type of cash flow or inflow and outflow during a period.

As you develop your statement of cash flows, integrate Invoicera’s Time Tracking feature. 

This feature allows you to track and bill every hour, providing a detailed insight into the time invested in various aspects of your business operations. 

This information contributes to a more accurate representation of how money flows through your business, aiding in effective cash flow management.

This information can indicate whether your company will have enough money for day-to-day operations or will have to rely on new investment sources for additional funding needs.

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Step 7: Pay Off High-Interest Debt    Pay Off High-Interest Debt

Paying off high-interest credit cards or other debt should be your primary step when preparing your cash flow. 

This will save you from paying unnecessary interest charges and provide you with more cash for other financial endeavors.

As you prioritize paying off high-interest debt, leverage Invoicera’s Online Payments feature. With 30+ integrated payment gateways, this tool streamlines the payment process, helping you save money and optimize your cash flow. 

By incorporating efficient online payment methods, you ensure that funds are allocated strategically, contributing to improved financial health.

You can also use an online budget spreadsheet or Cash Flow Software to track your income and expenses accurately.

This way, you can save money by tracking your income and expenses, helping you to get ahead financially. Save money today with online cash flow management tools!

Step 8: Create An Average Monthly Figure

You must create an average monthly figure when determining your cash flow forecast. 

A single transaction could distort your forecast if it were so large that it didn’t fit within your average. So, avoid skewing your results by creating a stable average monthly figure based on your transactions.

While creating an average monthly figure, utilize the Invoice App for Android by Invoicera. 

This mobile app enables you to manage your invoicing on the go, ensuring that your cash flow calculations are consistently accurate and reflective of your business’s financial reality.

Creating an average monthly figure also helps your business to have more clarity about its cash flow and assists you in planning for fluctuations in the future.

Step 9: Calculate Net Income (or loss)

Calculate Net Income

Calculate your net income (or loss) for each month. This is your total sales minus your business expenses. You can use cash flow software for step 9 or add up all of your costs and subtract that from all of your receipts to get an approximate number for each month.

Whichever method you choose, ensure that every line item expense is included.

If you don’t have any revenue yet, just keep track of expenses as they come in so that you will be able to compare them once revenues start rolling in.


Also Read: 10 Ways to Prepare a Cash Flow Statement Model That Actually Balances


Step 10: Review, Monitor, Adjust, Repeat

Once you’ve completed steps 1-9, you should have a monthly cash flow forecast. Sit back and have a look at it. This is where it becomes obvious how important month-to-month consistency is in your business’s cash flow.

If you see gaps, increasing or decreasing trends in income or expenses, or anything else out of whack, that’s when step 10 comes into play: monitor, adjust and repeat.

The whole process repeatedly happens until your numbers are right on target every month. Cash management is all about monitoring adjustments, so don’t be afraid to go through these steps again if you need to and make those necessary changes.

Invoicera Best Invoice Software


Invoicera, renowned as one of the best invoice software solutions, empowers businesses to streamline their financial processes. 

With its user-friendly interface and robust features, Invoicera facilitates not just invoicing but also aids in maintaining a comprehensive view of your cash flow.

Here are key features of Invoicera, the best invoice software, relevant to mastering financial stability and preparing your Cash Flow Forecast:

  • Automated Invoicing:

Invoicera streamlines the invoicing process by automating recurring tasks, ensuring invoices are generated and sent out promptly. 

This feature saves time and reduces the risk of overlooking essential billing cycles.

  • Expense Tracking:

Effectively managing expenses is crucial for accurate cash flow forecasting. 

Invoicera allows users to track and categorize expenses effortlessly, providing a comprehensive overview of financial outflows and helping businesses make informed decisions.

  • Customizable Invoice Templates:

Personalization is key, and Invoicera offers customizable invoice templates. 

Tailor your invoices to reflect your brand identity, creating a professional image that can positively impact client relationships and payment timelines.

  • Time Tracking:

For businesses that charge clients based on hourly rates, Invoicera’s time-tracking feature is invaluable. 

It allows you to monitor billable hours accurately, ensuring that your invoicing aligns with the time spent on projects.

  • Multi-Currency Support:

In the global business landscape, dealing with clients and vendors in different currencies is common. 

Invoicera supports multiple currencies, making it easy to create invoices and manage payments in the currency relevant to each transaction.

  • Payment Gateway Integration:

Invoicera integrates seamlessly with various payment gateways, facilitating faster and more secure online payments. 

This feature enhances cash flow by reducing the time it takes to receive payments, positively impacting your financial stability.

  • Financial Reports:

To master financial stability, you need insights into your financial performance. 

Invoicera provides detailed financial reports, including profit and loss statements, clearly understanding your business’s financial health. 

These reports are invaluable when preparing your Cash Flow Forecast.

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New business owners need to realize there is no simple, one-size-fits-all approach when it comes to creating financial forecasts. Because of that, it’s critical to seek help from advisors and professionals who know how your industry works so you can make sure you set yourself up for success from day one.

Cash flow software can be valuable in helping you do just that. Once your plan is written down and in black and white, it’ll be more accessible than ever to identify ways you might improve your business before you go into any official debt or hire any employees.

We hope you liked our ten steps to Prepare a Cash Flow Forecast. If so, please share it with your friends and colleagues.

Also, don’t forget to give your suggestions in the comment section and subscribe to our blogs for more interesting posts.

Till then

Thank you for being with us.


  • Q: Is Invoicera suitable for small businesses and freelancers?

A: Absolutely! Invoicera caters to businesses of all sizes, offering scalable features to meet the invoicing and financial management needs of small ventures, freelancers, and larger enterprises.

  • Q: How secure are online payments through Invoicera?

A: Invoicera prioritizes security. Online payments are processed through trusted gateways, ensuring your financial transactions are encrypted and protected. Invoicera adheres to industry standards to safeguard your sensitive data.

  • Q: Can I customize the look of my invoices with Invoicera?

A: Yes, you can! Invoicera provides customizable invoice templates, allowing you to tailor the look and feel of your invoices to match your brand identity. Impress clients with professional and branded invoices.