Intermediate level · Module 3: Business Finances for Entrepreneurs · Lesson 2 of 3
Cash Flow Forecasting
See cash shortages before they happen.
In this lesson you will
- Build a six-month cash flow forecast
- Plan for cash gaps
Key concepts
cash in and outopening and closing cashcredit salesbuffer
The lesson
A forecast lists expected cash in and cash out each month; closing cash becomes next month's opening cash.
Credit sales and stock purchases cause gaps between profit and cash.
Keep a buffer and plan early for months when cash is low.
Step by step
- Estimate monthly cash in.
- Estimate monthly cash out.
- Calculate closing cash.
- Plan for low months.
Six-month cash flow for a growing business
A profitable plan that still comes close to running out of cash in month two.
| Month | Cash in | Cash out | Closing cash |
|---|---|---|---|
| Jan | 600 | 1,000 | 100 |
| Feb | 900 | 950 | 50 |
| Mar | 1,100 | 1,000 | 150 |
| Apr | 1,200 | 1,050 | 300 |
| May | 1,350 | 1,100 | 550 |
| Jun | 1,500 | 1,150 | 900 |
What the data shows
Stock and launch spending in January push cash down to 100, and it falls to just 50 in February before sales catch up.
From March cash in exceeds cash out every month, and closing cash reaches 900 by June.
Recommendation
Protect the low months: delay the February equipment purchase, ask large customers for deposits, or arrange a small overdraft or savings-group loan before January — not when cash has already run out.
Practice activity
Build your six-month forecast.
Expected result: A forecast with low points and actions identified.
Check your understanding
-
What becomes next month's opening cash?
Show answer
This month's closing cash.
-
Why keep a cash buffer?
Show answer
To survive months when cash is low.
Taught live by an instructor — online or in person. Free course lessons are for self-study and do not lead to a certificate — see registration options.