The cash flow forecasting is the approximation of the timing and amounts of the cash outflow and the inflows over a particular period of time. The forecasting can identify the organizational requirements for the amounts to be borrowed and the ways to repay the loan. It is sometimes known as the cash flow projection or the cash flow budget.
Cash flow forecasting is a simple process which can predict the amount of money coming into your business and going out at a specific period of time. The cash flow can be depicted in the basic form in the spreadsheet where the income and the costs are listed in the monthly basis by summing the total of 1 year. The costs can be broken into categories where the seasonal variations can easily be identified. The cash flow forecasting can be managed with some golden rules:
- Every cash flow item should be included
- Multiple scenarios should be planned
- Factors of fixed and variable costs should be considered
- Definition of income and costs should be remembered
- Seasonality plans should be properly scheduled
- Realistic plans should be sanctioned