A short-term cash forecast estimates when money will enter and leave the business. Begin with cash available now, then place expected receipts and payments into dated periods. Do not substitute invoiced revenue for money received.
This guide uses four weeks to make the mechanics visible. Extend the same schedule to the horizon useful for your business. The amounts are fictional and exclude taxes and financing; a real forecast must include the payments that actually apply.
Build the first version
Opening cash is 5,000. “Receipts” means money expected in the bank during that week. “Payments” means money expected to leave it.
| Week | Opening cash | Receipts | Payments | Closing cash |
|---|---|---|---|---|
| 1 | 5,000 | 2,000 | 3,000 | 4,000 |
| 2 | 4,000 | 1,000 | 4,500 | 500 |
| 3 | 500 | 6,000 | 2,000 | 4,500 |
| 4 | 4,500 | 2,000 | 2,500 | 4,000 |
Each closing balance becomes the next opening balance:
Closing cash = opening cash + receipts − payments
Total receipts are 11,000 and payments are 12,000. The final 4,000 reconciles to 5,000 + 11,000 − 12,000. The low point, however, is only 500 in week 2. The final balance alone would hide that tight period.
Stress-test a late receipt
Move the 1,000 receipt in week 2 to week 4, keeping everything else unchanged. Closing balances become 4,000, −500, 3,500 and 4,000.
The month ends with the same cash, but week 2 now contains a 500 funding gap. A negative forecast balance represents an unmet cash requirement; it does not assume an overdraft is available.
If the payments and receipts within one week are large or closely timed, use daily dates. A weekly closing balance can conceal a shortage earlier in that week.
Build inputs from records
Use invoice due dates and payment history for customer receipts, purchase orders and supplier terms for materials, and dated payroll and recurring bills for payments. Separate an optimistic receipt from a confirmed one. Label estimated figures and record why you used the date.
The Australian Government’s cash-flow guidance recommends identifying estimates and making the tax convention explicit. The table and late-payment scenario above are original teaching examples. Cash-flow reference.
Avoid double counting
Do not include an invoice as a receipt when issued and again when paid. Do not include a supplier purchase twice through both an inventory line and an operating-cost total. Keep transfers between your own included bank accounts from appearing as new external income.
A loan receipt increases cash but is not sales. Loan principal paid reduces cash without being the same as an operating expense. If these apply, show them separately rather than silently folding them into revenue or job cost.
Use a runway figure cautiously
Cash divided by average net cash outflow compresses timing into one number. It can be a useful summary, but it misses the week-2 shortage shown here. Use a dated forecast when large invoices, deposits or supplier payments create uneven movements.
Start with profit versus cash flow, then use the agency cash projection calculator for a single-period check. Repeat the forecast with actual receipts each week and explain the differences.
About the examples and sources
The figures are hypothetical teaching examples created for AskToBot, not surveyed prices or recommended industry margins. The linked references explain the underlying concepts; they do not supply or endorse these example figures. The arithmetic is checked against the stated assumptions. This is AI-assisted educational content and has not been independently reviewed by an accountant. Read how we check calculations.
Decisions to check next
Sources & references
- Set up a cash flow statement — Australian Government — business.gov.au
