How to use the cash flow forecast calculator
The calculator builds a month-by-month forecast from a few assumptions. Each line of input corresponds to a line in the table under the results.
- Cash in the bank today. The total across your business accounts at the start of month 1.
- Revenue and growth. Enter the sales you expect to invoice or ring up in month 1 and a monthly growth rate. Use 0 for flat sales, or a negative number if sales are declining.
- Sales before month 1. Choose Yes for a running business: customers still owe you for last month’s and the month before’s sales, and that cash arrives in months 1 and 2. Choose No for a new business that starts with nothing owed to it.
- Collection pattern. Split each month’s revenue into the share collected in the month of sale, the next month and two months later. The three must add up to 100%. Your accounts receivable aging report shows how quickly customers actually pay.
- Cost of goods sold and supplier terms. Enter direct costs as a share of revenue, and whether you pay suppliers in the same month or the following one.
- Fixed expenses, loan payments and tax set-aside. Fixed costs include payroll, rent and software. The tax set-aside moves a share of each profitable month’s operating profit into a reserve, so the forecast does not spend money that belongs to the tax authorities.
- One-off items. Add a row for each unusual cash movement with its month, its amount and a short description. Enter money coming in as a positive number (a loan received, an asset sale) and money going out as a negative one (equipment, an annual insurance premium, an estimated tax payment).
The bar chart shows the bank balance at the end of each month; any bar below the zero line is a month you cannot pay your bills without extra funding.
How the forecast is calculated
Each month, the calculator works out the cash collected and the cash paid, then carries the balance forward:
Cash inm = a × Revm + b × Revm−1 + c × Revm−2
Suppliersm = COGS% × Revm (same month) or COGS% × Revm−1 (next month)g is the monthly growth rate and a, b, c the shares collected in the month of sale, the next month and two months later. For an existing business, revenue before month 1 follows the same growth path backwards; for a new business it is zero.
Tax reservem = max(0, Operating profitm) × tax %
Net cash flowm = Cash in − Suppliers − Fixed − Loan − Tax reserve + One-offs
Ending cashm = Ending cashm−1 + Net cash flowmThe lowest ending balance is the low point of the year. If it is below zero, the funding needed is that amount: the smallest injection, made in time, that keeps the account at or above zero all year.
A worked example
A business starts the year with $25,000 in the bank. It expects $60,000 of sales in month 1, growing 2% a month. Customers pay 30% in the month of sale, 50% the next month and 20% the month after. Direct costs are 45% of sales, paid to suppliers the following month; fixed costs are $26,000 and loan payments $2,500 a month.
In month 1 the business collects $58,946 and ends the month $2,225 better off. In month 3 the new equipment purchase pulls the balance down to $15,139, the lowest point of the year.
From there the balance recovers, helped by a sale of used equipment in month 8, and ends month 12 at $64,911. Over the year the business invoices $804,725, earns $130,599 of operating profit and sets aside $32,650 for tax, yet generates only $39,911 of cash. At year-end customers still owe it $66,850.
The gap between profit and cash is the point of the exercise. Some of it is the tax reserve and the loan payments, which are real outflows even though only the interest part of a loan payment is an expense. The rest is growth: each month’s sales are higher than the last, so the money owed by customers keeps rising, and that money is not in the bank.
Collection speed matters as much as sales
Changing nothing but how quickly customers pay shows how much cash the receivables ledger holds:
| Collection pattern | Lowest balance | Cash at month 12 | Owed by customers at month 12 |
|---|---|---|---|
| 60% same month, 40% next | $16,925 | $72,738 | $29,841 |
| 30% / 50% / 20% (the example) | $15,139 | $64,911 | $66,850 |
| 10% / 50% / 40% | $13,713 | $58,661 | $96,398 |
The three businesses have identical sales and costs; only the timing differs. That is why invoicing promptly, taking deposits and following up on overdue accounts are cash management tools, not just administration. Supplier terms work the other way: paying suppliers in the month you buy instead of the month after lowers the year’s low point to $13,519.
Starting from zero: a new business
A new business has no earlier invoices to collect, but its bills start at once. Run the same example as a new business and the picture changes:
With no sales before month 1, the business collects only $18,000 in month 1, and the net cash flow that month is -$12,250. The balance falls below zero in 3 months, reaching -$11,101 in month 3. The business needs at least $11,101 of funding in place before then, even though it is profitable from the first month.
This is the classic cash trap of a young, growing business: profit on paper, an empty bank account in practice. The forecast tells you the size of the credit line or owner loan to arrange, and when.
How to read the result
- The low point matters more than the year-end balance. A healthy year-end figure can hide a month in which payroll cannot be met. Plan around the lowest bar on the chart.
- Funding needed is a floor, not a target. It assumes everything happens exactly as forecast. Most owners want a buffer of at least a month of fixed costs on top.
- Growth can add cash or consume it. With flat sales, the example ends the year at $37,000 instead of $64,911: at a 55% gross margin, the extra profit from growth outweighs the extra money tied up in unpaid invoices. With thin margins and slow-paying customers the balance tips the other way, and faster growth leaves less cash in the bank, not more.
- Update it monthly. Replace the forecast for the month just ended with the actual figures. The differences show which assumptions were optimistic.
What this calculator does not include
- Seasonality. Revenue follows one steady growth rate. If your sales swing by season, use one-off rows to adjust specific months.
- Bad debts. The collection percentages must total 100%, so every invoice is assumed to be paid. Reduce revenue if some customers will not pay.
- Inventory build-up. Supplier payments follow the cost of goods sold. Buying stock ahead of a busy season is a one-off outflow you should add.
- Accurate tax. The set-aside is a simple percentage of each profitable month, with no offset for loss months, no deductions and no payment schedule. Add actual estimated tax payments as one-off items if you know them.
- Interest on the cash balance or on an overdraft, and any changes in fixed costs during the year.
For a longer view of how long cash lasts when a business is not yet profitable, use the burn rate and runway calculator. The working capital and cash conversion cycle calculators measure how much money the operating cycle ties up.