Cash Flow Forecast

An example cash flow forecast

Cash flow is an estimate of the future levels of cash inflow and outflow used to calculate the total cash flow

Cash inflow is the amount of money a business has earned over a period of time

Cash outflow is the amount of money a business has spent over a period of time

Importance of cash flow

• Businesses can identify future cash flow shortages and hence can prepare for such events
• A business can apply for additional funds to overcome expected shortages
• It is an advance planning tool which will help the business take proper decisions about managing cash
• The business can use the cash flow forecast to look for new investors