A 12-month cash flow forecast estimates when money will enter and leave your business. Its value comes from making assumptions visible early enough to review them. It does not predict the future with certainty, and it should not be confused with a profit statement.

Set the period and opening balance

Choose the twelve months you need to plan and use one stated currency. For a January–December 2027 plan, begin with the cash you expect to have at the start of January. Label that balance as estimated until you can reconcile it against actual records. Use separate accounts or schedules where combining funds would be misleading.

Forecast receipts by payment date

Place customer receipts in the month you reasonably expect collection. Do not assume an invoice raised in January is paid in January. Record payment terms, deposits, instalments and any known late-payment pattern. Separate sales receipts from borrowing, owner contributions and other inflows so the source of available cash remains clear.

Forecast payments by their timing

List the payments your business expects to make: suppliers, payroll, rent, subscriptions, equipment and other commitments. Keep one-off payments separate from recurring costs. Check tax-related timing with your actual obligations or adviser rather than copying a generic date into the worksheet.

A worked example

For an illustrative month, opening cash is USD 3,000, expected receipts are USD 4,500 and payments are USD 5,000. Closing cash is 3,000 + 4,500 − 5,000 = USD 2,500. That closing figure becomes the following month's opening figure. The numbers are fictional; use reconciled records and explicit currency codes in your own plan.

Test an alternative scenario

Keep a base case and a clearly labelled alternative. For example, move one expected receipt into the next month while leaving the agreed supplier payment where it is. Review the resulting balance and identify which assumption needs attention. A scenario is a planning question, not a prediction or a recommendation to borrow.

Update the forecast every month

  1. Replace the completed month's estimates with actual receipts and payments.
  2. Explain material differences: delayed collection, a changed cost or a missing item.
  3. Update the remaining assumptions and keep a dated version so changes can be understood.

Review any expected shortfall with the relevant decision makers early. A spreadsheet can show a gap, but it cannot determine the appropriate financial response for your business.