You don’t know when cash will run out.
You’re spending. Revenue is coming in. But you can’t predict when the numbers will flip.
You’re flying blind. You’re worried. You’re stressed.
Unpredictable cash needs create crises.
You can’t plan. You can’t prepare. You can’t prevent problems.
This guide shows you how to forecast cash needs.
Use cash flow forecasting. Use runway calculations. Use scenario planning. Predict confidently.
Key Takeaways
- Cash flow forecasting predicts when cash will run out—use Cash Flow Forecast Calculator to project future cash positions
- Runway shows how long cash will last—calculate runway using Cash Runway Calculator based on current cash and burn rate
- Scenario planning models best, base, and worst cases—forecast multiple scenarios to prepare for uncertainty
- Monitor cash flow weekly and update forecasts monthly—regular forecasting catches problems early before they become crises
- Cash flow forecasting requires tracking revenue, expenses, and timing—accurate inputs create accurate forecasts
Table of Contents
Why Cash Forecasting Matters
Cash forecasting determines survival.
Without cash forecasting:
- You don’t know when cash will run out
- You can’t plan for cash needs
- You’re surprised by cash shortages
- You can’t prevent crises
- Business failure risk increases
With cash forecasting:
- You know exactly when cash will run out
- You can plan for cash needs
- You prevent cash shortages
- You avoid crises
- Business operates securely
The reality: Unpredictable cash needs cause 90% of cash flow crises.
Most businesses don’t forecast cash flow. They hope. They guess. They fail.
The truth: Cash forecasting is calculable. Forecast it. Monitor it. Control it.
Understanding Cash Flow
Cash flow is money in minus money out.
Cash inflows:
- Revenue collections
- Loan proceeds
- Investment capital
- Other income
Cash outflows:
- Operating expenses
- Loan payments
- Capital expenditures
- Other expenses
Net cash flow:
- Positive = Cash increasing
- Negative = Cash decreasing
The question: When will cash run out?
The answer: Calculate runway and forecast cash flow.
Calculating Runway
Runway shows how long cash will last.
Step 1: Calculate Current Cash
Determine current cash balance.
Cash includes:
- Bank accounts
- Available credit
- Liquid assets
Total: Your current cash.
Step 2: Calculate Monthly Burn Rate
Calculate how fast you spend cash.
Burn rate:
- Monthly expenses minus monthly revenue
- Net cash consumption per month
Use the Burn Rate Calculator to calculate.
Step 3: Calculate Runway
Divide cash by burn rate.
The formula:
- Runway = Current Cash / Monthly Burn Rate
Example:
- Current cash: $200,000
- Monthly burn rate: $20,000
- Runway = $200,000 / $20,000 = 10 months
You have 10 months of runway.
Step 4: Use Calculator
Use the Cash Runway Calculator to calculate automatically.
The calculator shows:
- Current runway
- Runway at different burn rates
- Runway scenarios
- Critical alerts
Cash Flow Forecasting
Forecast cash flow to predict when cash runs out.
Step 1: Project Cash Inflows
Project revenue and other cash inflows.
Inflow projections:
- Monthly revenue
- Collection timing
- Other income
- Seasonal patterns
Project for 12-24 months.
Step 2: Project Cash Outflows
Project expenses and other cash outflows.
Outflow projections:
- Monthly expenses
- Payment timing
- Capital expenditures
- Debt payments
Project for 12-24 months.
Step 3: Calculate Net Cash Flow
Subtract outflows from inflows for each period.
Net cash flow:
- Month 1: $X
- Month 2: $Y
- Month 3: $Z
- And so on…
Track cumulative cash balance.
Step 4: Identify Cash Shortfalls
Identify when cash balance goes negative.
Shortfall indicators:
- Negative cash balance
- Cash below minimum threshold
- Runway below 3 months
Plan for shortfalls before they occur.
Step 5: Use Calculator
Use the Cash Flow Forecast Calculator to forecast automatically.
The calculator shows:
- Monthly cash flow projections
- Cumulative cash balance
- Cash shortfall dates
- Scenario comparisons
Scenario Planning
Plan for multiple scenarios to handle uncertainty.
Scenario 1: Best Case
Optimistic projections.
Best case assumptions:
- Higher revenue growth
- Lower expenses
- Faster collections
- Better market conditions
Result: Longer runway. More cash available.
Scenario 2: Base Case
Realistic projections.
Base case assumptions:
- Expected revenue growth
- Expected expenses
- Normal collections
- Normal market conditions
Result: Expected runway. Normal cash needs.
Scenario 3: Worst Case
Conservative projections.
Worst case assumptions:
- Lower revenue growth
- Higher expenses
- Slower collections
- Challenging market conditions
Result: Shorter runway. Higher cash needs.
Using Scenarios
Plan for worst case. Hope for best case.
Planning:
- Ensure worst case runway is adequate
- Prepare contingency plans
- Secure backup funding
- Monitor actual vs. forecast
Use the Cash Flow Forecast Calculator to model scenarios.
Cash Forecasting Framework
Use this framework to forecast cash needs.
Step 1: Calculate Current Runway
Calculate how long current cash lasts.
Calculate:
- Current cash balance
- Monthly burn rate
- Current runway
Use the Cash Runway Calculator.
Step 2: Forecast Cash Flow
Forecast cash flow for 12-24 months.
Forecast:
- Cash inflows
- Cash outflows
- Net cash flow
- Cumulative balance
Use the Cash Flow Forecast Calculator.
Step 3: Model Scenarios
Model best, base, and worst case scenarios.
Model:
- Best case projections
- Base case projections
- Worst case projections
Plan for worst case.
Step 4: Identify Shortfalls
Identify when cash will run out in each scenario.
Identify:
- Shortfall dates
- Shortfall amounts
- Critical periods
Plan solutions before shortfalls occur.
Step 5: Monitor and Update
Monitor actual cash flow and update forecasts.
Monitor:
- Actual vs. forecast weekly
- Update forecasts monthly
- Adjust plans as needed
- Track accuracy
Your Next Steps
Stop guessing about cash. Start forecasting.
This week:
- Calculate your runway using the Cash Runway Calculator
- Forecast cash flow for next 12 months using the Cash Flow Forecast Calculator
- Model best, base, and worst case scenarios
- Identify potential cash shortfalls
This month:
- Update cash flow forecast weekly
- Track actual vs. forecast
- Adjust plans based on results
- Prepare contingency plans
Ongoing:
- Forecast cash flow monthly
- Monitor runway weekly
- Update scenarios quarterly
- Track forecast accuracy
Remember: Cash forecasting prevents crises. Forecast regularly. Monitor closely. Plan proactively.
Key Takeaways Recap
- Cash flow forecasting predicts when cash will run out—use Cash Flow Forecast Calculator to project future cash positions
- Runway shows how long cash will last—calculate runway using Cash Runway Calculator based on current cash and burn rate
- Scenario planning models best, base, and worst cases—forecast multiple scenarios to prepare for uncertainty
- Monitor cash flow weekly and update forecasts monthly—regular forecasting catches problems early before they become crises
- Cash flow forecasting requires tracking revenue, expenses, and timing—accurate inputs create accurate forecasts
Related Tools and Resources
Cash Flow Forecasting Calculators
- Cash Flow Forecast Calculator - Project future cash positions
- Cash Runway Calculator - Calculate how long cash will last
- Burn Rate Calculator - Track spending rate
- Operating Cash Flow Calculator - Analyze operating cash flow
Financial Planning Tools
- Funding Need Calculator - Determine capital requirements
- Cash Reserve Ratio Calculator - Calculate optimal cash reserves
Need help forecasting your cash needs? Contact Business Initiative for cash flow forecasting and strategic guidance.
