A relatively simple Microsoft Excel spreadsheet is usually the best tool for predicting cash flow. This spreadsheet will track when you expect your revenue to hit the bank account and when your bills and payroll will leave the bank account. The first column (each column represents a time period, usually a week) in your spreadsheet will begin with your bank account balance, then add incoming cash, subtract outgoing cash, and finally total to what you expect to have left in the bank. That ending bank balance will be the beginning bank balance in the next column (time period)…wash, rinse, repeat.
Sample Cash Flow Forecast
(Invoices are kept on a separate spreadsheet in this sample. Forecast would normally extend numerous weeks)
Keeping an updated cash flow forecast will enable you to make smart money decisions. If you see the ending balance is going negative, you know you need to make some adjustments to your plan. If you want to make a large purchase or extend longer payment terms to a client, you can make those adjustments in your forecast; you’ll know if you have enough cash to support it before you make the commitment.