What is a cash flow forecast?
- By Book Keeping Pros
- Sources checked 15 Oct 2026
Definition
A cash flow forecast sets out, period by period, the money a business expects to come in and go out over the coming weeks or months. Starting from the current bank balance, it shows the expected closing balance for each period, so a shortfall can be seen and planned for before it happens.
A forecast follows the timing of cash, not of sales and costs. A sale made on credit appears when the customer is expected to pay, and a bill appears when it will be paid rather than when it arrives. Loan principal, equipment purchases and a sole trader's or partner's drawings all use cash without appearing as running costs in the profit and loss statement, so they go in as well.
A forecast can run month by month for the year ahead. When cash is tight, a week-by-week forecast for the next few weeks shows the pinch points more clearly, such as a week in which wages, rent and a large supplier bill all fall due together.
Bookkeeping supplies the starting figures. Unpaid customer invoices show the money due in soon, unpaid supplier bills and known due dates show the money going out, and past months' records show seasonal patterns. A forecast built on books that are weeks behind starts from the wrong balance and misses bills already received.
In Australia
business.gov.au presents a cash flow forecast as a tool for checking whether future income will cover future costs, built from estimates of sales and costs, and links it to preventing cash shortages and debt. It says its cash flow statement template can be turned into a forecast by filling in estimates for each period ahead, and its glossary treats projection as another name for a forecast.
Its budgeting guide ranks the cash flow statement among a business's most important forecasting tools, saying it helps you stay on top of bills and can show lenders that a loan can be repaid. It suggests updating your forecast monthly or quarterly.
Its guidance on the warning signs of financial trouble lists being unsure what money is flowing in or out among the signs of a cash flow problem, and says a cash flow statement helps you forecast cash flow and see what you owe and when it is due.
Worked example
| Item | Week 1 (AUD) | Week 2 (AUD) | Week 3 (AUD) |
|---|---|---|---|
| Opening bank balance | 8,400.00 | 9,300.00 | 1,550.00 |
| Customer payments expected | 3,600.00 | 1,200.00 | 5,800.00 |
| Cash sales | 1,900.00 | 1,700.00 | 2,100.00 |
| Wages | 3,100.00 | 3,100.00 | 3,100.00 |
| Rent | 0.00 | 2,600.00 | 0.00 |
| Supplier bills due | 1,500.00 | 4,300.00 | 900.00 |
| Loan repayment | 0.00 | 650.00 | 0.00 |
| Closing bank balance | 9,300.00 | 1,550.00 | 5,450.00 |
Illustrative example only: these rows show the method and are not sourced data.
Common mistakes
- Leaving out payments that are not running costs, such as loan principal, equipment purchases or drawings.
- Starting from the balance in books that have not been reconciled with the bank statement.
- Showing only monthly totals when several large payments fall due in the same week.
- Treating the forecast as a target to hit rather than an estimate to revise as new figures come in.
Related terms
Related service
Management and cash-flow reports
Monthly reports that show where the business stands.
Sources
- Set up a cash flow statement
business.gov.au, Australian Government. Current at 15 October 2026, released 22 May 2025. Checked 15 October 2026.
© Commonwealth of Australia 2020, licensed under CC BY 3.0 AU. Licence: CC BY 3.0 AU.
- Create a budget
business.gov.au, Australian Government. Current at 16 October 2026, released 14 November 2025. Checked 16 October 2026.
© Commonwealth of Australia 2020, licensed under CC BY 3.0 AU. Licence: CC BY 3.0 AU.
- Warning signs your business is in financial trouble
business.gov.au, Australian Government. Current at 16 October 2026, released 20 May 2025. Checked 16 October 2026.
© Commonwealth of Australia 2020, licensed under CC BY 3.0 AU. Licence: CC BY 3.0 AU.
- Key financial terms
business.gov.au, Australian Government. Current at 15 October 2026, released 9 July 2024. Checked 15 October 2026.
© Commonwealth of Australia 2020, licensed under CC BY 3.0 AU. Licence: CC BY 3.0 AU.