3.7.4—Cash flow forecasts

A cash-flow forecast estimates inflows and outflows over a future period so a business can anticipate shortages, surpluses and finance needs. It is useful because each assumption can be changed and the knock-on effect traced.

Carry the closing balance forward as the next opening balance and recalculate after any change in wages, sales, stock or loan payments. Forecasts can support borrowing and planning, but their reliability depends on research, skill and realistic assumptions.

If a new assistant raises monthly wages by £3,000, total outflows, net cash flow and every later closing balance change. The model exposes when the extra cost becomes affordable rather than hiding it in a single annual profit figure.

A precise-looking table is not accurate evidence by itself. Test sensitivity to external shocks, seasonal sales and payment timing, and distinguish an expected balance from money already in the bank.