Cash available at the start of the period
Net Cash Flow = Total Inflows - Total Outflows
Net Cash Flow shows whether more cash entered or left your business during the period.
Ending Balance = Opening + Net Cash Flow
Ending Balance is your projected cash position at the end of the period.
Runway = Ending Balance / Monthly Burn Rate
Cash flow forecasting is the process of estimating how much money will flow into and out of your business over a given period. Unlike profit, which is an accounting concept, cash flow reflects the actual movement of money. A business can be profitable on paper but still run out of cash if customers pay late, inventory ties up capital, or large expenses hit at the wrong time. Cash flow forecasting helps you anticipate these gaps and plan accordingly.
Regular cash flow forecasting is considered one of the most critical financial management practices for businesses of all sizes. According to a U.S. Bank study, 82% of small businesses that fail cite cash flow problems as a contributing factor. By projecting your cash position weeks or months in advance, you can make proactive decisions about spending, borrowing, and investment rather than reacting to crises after they occur.
Cash Inflows
Cash inflows represent all money coming into your business. The primary source is typically sales revenue -- cash collected from customers for products or services. Other inflows include collected accounts receivable (payments from customers who bought on credit), interest earned on savings or investments, proceeds from asset sales, loans received, and any government grants or subsidies. Timing matters greatly -- revenue recognized on an invoice is not the same as cash received in your bank account.
Cash Outflows
Cash outflows are all payments leaving your business. These include cost of goods sold (raw materials, manufacturing costs, inventory purchases), operating expenses (rent, utilities, salaries, marketing, insurance), loan repayments (principal and interest), tax payments, capital expenditures (equipment, vehicles, property), and owner distributions or dividends. Some outflows are fixed and predictable (rent, loan payments), while others vary with business activity (materials, commissions).
Burn Rate and Runway
When outflows exceed inflows, the difference is your burn rate -- the speed at which you are consuming cash reserves. Cash runway is how many months your business can continue operating at the current burn rate before running out of cash. Startups and growing businesses often operate at a negative cash flow intentionally, but understanding your runway is critical for knowing when you need to raise capital, cut costs, or accelerate revenue growth.
Profit and cash flow are related but distinct concepts. Profit is calculated using accrual accounting, where revenue is recognized when earned and expenses when incurred, regardless of when cash actually changes hands. Cash flow, on the other hand, tracks the actual movement of money into and out of your bank accounts. A company can show a profit while being cash-poor if it has large outstanding receivables, or it can show a loss while having strong cash reserves from a recent investment round.
This distinction is why many successful businesses have failed despite being profitable. A classic example is a fast-growing company that lands a large contract but must pay for materials and labor upfront while waiting 60-90 days for customer payment. The P&L looks great, but the cash account is empty. Cash flow forecasting bridges this gap by showing you when cash will actually be available, allowing you to plan for financing needs, negotiate better payment terms, or time major purchases appropriately.
Cash flow forecasting serves multiple practical purposes across all stages of business. For startups, it is essential for demonstrating to investors how long current funding will last and when the next round will be needed. For seasonal businesses like retail or tourism, it reveals which months will require extra cash reserves and when surplus funds can be invested or saved. For established businesses, it supports decisions about hiring, equipment purchases, and expansion timing.
Banks and lenders routinely require cash flow forecasts as part of loan applications because they reveal whether a business can service its debt obligations. Internally, comparing actual cash flow against forecasts helps identify variances early -- if collections are lagging behind projections or expenses are running higher than expected, you can take corrective action before a minor gap becomes a major cash crisis.
Cash flow forecasts are estimates, and their accuracy depends on the quality of your assumptions. Unexpected events -- a major customer defaulting, equipment breaking down, economic downturns, or sudden market changes -- can render even well-crafted forecasts inaccurate. The further out you forecast, the less reliable the projections become, which is why most businesses focus on 4-12 week rolling forecasts for operational planning.
This calculator provides a simplified single-period forecast. In practice, businesses create multi-period forecasts (weekly or monthly for several months ahead) and update them regularly as actual data comes in. Despite its limitations, even a simple cash flow forecast is far better than none -- it forces you to think systematically about your cash position and make decisions based on projected reality rather than gut feel.
The single most impactful thing you can do for cash flow is accelerate collections. Invoice promptly, offer small discounts for early payment, and follow up on overdue accounts immediately. Many businesses leave thousands of dollars on the table simply by being slow to invoice or reluctant to chase late payments. Automating invoicing and payment reminders can dramatically improve collection speed.
On the outflow side, negotiate longer payment terms with suppliers and schedule large payments strategically. Maintain a cash reserve equal to at least 3-6 months of operating expenses for unexpected events. Consider establishing a line of credit before you need it -- lenders are far more willing to extend credit when your business is healthy than when you are in a cash crunch. Finally, review your forecast weekly and adjust as new information becomes available to stay ahead of potential cash gaps.