What is cash flow forecasting for a small business?

It is projecting the cash coming in and going out over a set period, dated to when the money actually moves, so you can see a shortfall or surplus before it arrives. It answers whether you'll have enough in the bank to cover what's due, and when.

What is a 13-week cash flow forecast?

A week-by-week projection of cash in and cash out over the next quarter, updated as real invoices and bills come in. Thirteen weeks is long enough to see a squeeze coming and short enough that the numbers stay grounded in reality.

How do I forecast cash flow?

Start with today's actual bank balance, list expected receipts and disbursements by the week they'll clear, roll the balance forward 13 weeks, find your lowest point, and update it weekly. The mechanics are simple; the hard part is deciding what to do when the low point looks thin.

Isn't a spreadsheet good enough for cash flow forecasting?

It can start you off, but spreadsheets are passive and error-prone. Studies find 88% contain errors, and owners lose 10 to 20 hours a month maintaining them. A stale, hand-built forecast is the one you quietly stop updating.

Does cash flow forecasting software solve the problem?

It solves half of it. Good software pulls your numbers and keeps the picture current, which beats a spreadsheet. What it does not do is tell you what to do about a shortfall, which is the judgment part owners actually need.

How is this different from what my bookkeeper or CPA does?

A bookkeeper records what already happened; a CPA handles tax and compliance. Cash flow forecasting is forward-looking CFO work: what your cash will do next and what to do about it. Walden does that forward-looking work and refers all tax and attest matters back to your CPA.

Advisory

Cash Flow Forecasting for Small Business: Worth It or Not?

Most small businesses don't fail because they can't sell. They fail because the cash ran out on a Tuesday. Here's what cash flow forecasting actually does, and whether it's worth it for your business.

Read on Walden →