Cash Flow Forecasting: Stop Being Surprised by Your Bank Balance

Your profit and loss statement says the business made $80,000 last quarter. Your bank account has $11,000 in it. Both numbers are correct. This is not a contradiction — it’s the gap between profitability and cash flow, and it’s where growing businesses get into trouble.

Revenue is an accounting concept. Cash is what pays wages, suppliers, and the tax office. The P&L tells you whether the business is viable over time. Cash flow tells you whether you can make it to Friday.

Cash flow forecasting bridges that gap. It answers the most practical question in business: will we have enough money to cover what’s coming?

Why Growing Businesses Have Cash Flow Problems

Counter-intuitively, growth is one of the most common causes of cash flow crises. Here’s why.

Revenue lags behind costs. You hire a new technician (cost: immediate). You buy materials for a project (cost: within 30 days). The customer pays the invoice (revenue: 45-60 days later). Every new job creates a cash gap between when you spend and when you get paid. More jobs means a bigger gap.

Seasonal patterns amplify the problem. If your business has seasonal peaks — construction slowing in winter, HVAC demand surging in summer — your costs don’t follow the same pattern. Rent, wages, insurance, and loan repayments stay constant. Revenue fluctuates. The gap between the two creates predictable cash pressure at the same time every year.

Large invoices create false confidence. A $120,000 invoice lands in your receivables. You feel wealthy. But that invoice might not convert to cash for six weeks. In the meantime, you’ve got $85,000 in payables due next fortnight. The receivables ledger looks healthy. The bank account tells a different story.

What Cash Flow Forecasting Actually Involves

At its simplest, cash flow forecasting is this: what money is coming in, what money is going out, and when?

Cash In

• Confirmed receivables. Invoices that have been sent with expected payment dates.
• Expected revenue. Accepted quotes, contracted work, recurring revenue. Not pipeline — just the work that’s confirmed.
• Other income. Interest, refunds, grants, asset sales. Usually minor, but include them if they’re predictable.

Cash Out

• Fixed costs. Rent, wages, insurance, loan repayments, subscriptions. These are predictable and recurring.
• Variable costs. Materials, subcontractors, fuel, project-specific expenses. These fluctuate with workload.
• Tax obligations. BAS, PAYG, income tax, super. These hit at specific dates and are often larger than people expect.
• Capital expenditure. Vehicle purchases, equipment, technology. Lumpy costs that create cash spikes.

The forecast maps these inflows and outflows onto a timeline — usually 13 weeks for operational planning or 12 months for strategic planning. The result is a week-by-week (or month-by-month) projection of your bank balance.

When the projected balance dips below zero — or below your comfort threshold — that’s a cash gap. The entire point of forecasting is to see those gaps weeks or months before they arrive, when you still have time to do something about them.

The Spreadsheet Approach (And Its Limits)

Most businesses start with a spreadsheet. Columns for weeks, rows for income and expense categories, formulas that sum to a running balance. This works. For a while.

The problems emerge as the business grows:

Manual updates. Someone needs to update the spreadsheet with actual figures from accounting, adjust the forecast based on new quotes, and reconcile the projections with reality. This takes hours and usually falls behind.

Static assumptions. A spreadsheet forecast is typically built on averages: “customers pay in 35 days on average.” But averages hide variance. Some customers pay in 14 days. Some pay in 60. The average says you’re fine while the reality says you’re short this particular week because three slow payers all hit at once.

No scenario modelling. What happens if that big contract gets delayed by a month? What if materials costs increase 15%? What if you hire two more people in April? In a spreadsheet, testing these scenarios means manually changing dozens of cells and hoping you don’t break a formula.

Single version of reality. The spreadsheet lives on someone’s computer. It reflects their assumptions, their update schedule, their formula logic. When that person is away, nobody else can produce the forecast — or trust the one that’s there.

Tools on the Market

Several off-the-shelf tools handle cash flow forecasting reasonably well:

Float and Futrli integrate with Xero and QuickBooks to pull actuals and project forward. They handle basic scenario modelling and provide visual timelines. Good for straightforward businesses with standard income and expense patterns.

Fathom adds forecasting alongside financial analysis and KPI dashboards. Strong if you want cash flow forecasting bundled with broader financial reporting.

Xero’s built-in projections offer a basic 30-day view. Better than nothing, but too short and too simplistic for serious planning.

These tools work well when your cash flow is relatively predictable — recurring revenue, consistent payment terms, stable costs. They start to struggle when your reality is more complex.

When You Need Something Custom

The gap between off-the-shelf and custom forecasting usually appears when your cash flow depends on data from multiple systems.

Project-based businesses. If cash comes in at project milestones — 30% deposit, 40% at rough-in, 30% on completion — your forecast needs to know where each project sits in its lifecycle. That data lives in your project management tool, not your accounting system.

Businesses with variable job pipelines. If you’re quoting constantly and winning work at a predictable rate, your forecast should include probable revenue from the pipeline — weighted by close probability. That data lives in your CRM or quoting system.

Businesses with complex supplier terms. If you’re juggling 30-day, 60-day, and COD terms across different suppliers, and the mix changes depending on what jobs are running, a simple “average payable days” assumption won’t cut it.

Seasonal businesses that need to plan across the cycle. If you need to stockpile cash in peak months to survive lean months, and “lean” and “peak” vary by service line, your forecast needs to model each service line separately and combine them.

In these cases, a custom forecasting tool pulls data from accounting, job management, CRM, and scheduling systems to build a forecast that reflects how your business actually works — not how a generic template assumes it works.

Scenario Modelling: The Real Power

The static forecast tells you what’s likely to happen. Scenario modelling tells you what could happen — and whether you’re prepared for it.

Useful scenarios to model:

• Delayed payment. What if your largest customer pays 30 days late? Does it create a gap?
• Growth scenario. What if you hire two people next quarter? What’s the cash impact before the revenue catches up?
• Lost contract. What if your largest recurring contract doesn’t renew? How long can you sustain current costs?
• Cost spike. What if materials costs increase 20%? At what point does the current pricing become unsustainable?
• Seasonal stress test. Based on last year’s seasonal dip, what’s the minimum cash reserve you need to hold?

The ability to test these scenarios in minutes — rather than spending an afternoon rebuilding a spreadsheet — is the difference between reactive and proactive financial management.

Getting Started

If you’re not forecasting cash flow at all, start with a 13-week spreadsheet. Map out what you know: confirmed receivables, fixed costs, and known commitments. Even a rough forecast beats none.

If you’ve outgrown the spreadsheet — if it takes too long to update, doesn’t account for enough variables, or lives in one person’s head — that’s the signal to look at dedicated tools.

And if your cash flow depends on data that lives across multiple systems — accounting, job management, CRM, scheduling — then connecting those systems into a single forecasting view is the step that turns cash flow management from a monthly anxiety exercise into a reliable, ongoing process.

The goal isn’t perfect prediction. It’s early warning. See the gaps coming, and you can fill them. Miss them, and they fill themselves — usually at the worst possible time.