How to Cashflow Forecast: A practical guide for FP&A and Accounting Teams

Edgar de Wit

Even the most profitable companies can run into trouble if their cash inflows and outflows aren’t properly aligned. That’s why cashflow forecasting is a critical tool for finance, FP&A, and accounting teams. It goes beyond profit and loss reporting, helping you manage liquidity, prepare for uncertainty, and plan with confidence.

What is cashflow forecasting?

Cashflow forecasting is the process of projecting your company’s future cash position. It answers questions like:

• Do we have enough cash to cover expenses next quarter?
• When is the best time to invest in growth or new hires?
• What happens to our liquidity if sales drop or payments are delayed?

Unlike budgeting and planning, which focus on revenues and expenses, cashflow forecasting focuses on timing — when money actually moves in and out of your accounts.

Why does cashflow forecasting matter?

• Liquidity management: Avoid surprises and keep operations running smoothly.
• Strategic decision-making: Plan investments, hiring, or financing with confidence.
• Scenario planning: See the impact of best-case, worst-case, and most-likely situations.
• Risk reduction: Spot cash shortfalls before they become a crisis.

How to create a cashflow forecast

1. Define your time horizon: Choose whether you want a short-term (weekly/monthly) or long-term (quarterly/annual) forecast.
2. Gather reliable data: Pull data directly from your accounting software to ensure accuracy.
3. Map inflows and outflows: Include revenue, loan proceeds, customer payments, operating expenses, payroll, taxes, and investments.
4. Factor in timing: Adjust for when money is actually received or paid—not just when it’s invoiced.
5. Run scenarios: Test how different assumptions (delayed payments, higher costs, faster growth) affect your liquidity.
6. Review regularly: A forecast is only useful if it’s updated with real data and evolving business conditions.

Real-world example

A SaaS company models its subscription renewals. If 10% fewer renewals occur than planned, the forecast shows a cash dip within three months. With this insight, management decides to delay hiring until renewal rates stabilize.

Conclusion

Cashflow forecasting is about enabling growth. When you understand your future liquidity, you can make bold moves with confidence.

With XLReporting, you can connect directly to your accounting system, build rolling cashflow forecasts, and run instant what-if scenarios. Stop guessing. Start planning.