cash flow forecast

3 min

How to go beyond simple invoice management and build better cash flow forecasts

To manage cash flow, you need accurate cash flow forecasts. With forewarning of shortfalls, you can take steps to adjust your course. Libeo gives you real-time forecasts in one click.

Published on | Updated on

Why Cash flow forecasting is essential for businesses

Prioritising cash flow is always important. We even recently wrote a blog about it. But in this article, we’re going to dive deeper into organizing your finances as a small business – into the land of cash flow forecasts.

Put simply, cash flow forecasting is a method of estimating the amount of ready money coming in to and out of your business over any given month, year or other relevant period.

The chief advantage of a cash flow forecast is to give your business forewarning of any shortage. Employing corrective measures to head off negative cash flow – for example, preemptive changes to your payment strategies and collection terms, selling assets or arranging loans – can go a long way toward softening the financial blow.  

It is essential to optimise your cash flow. The aim is to balance your finances, maximise the amount of money in your bank account and reduce reliance on credit.

Optimising cash flow can have several meanings. It might refer to increasing capital, gaining extra resources through a bank loan, negotiating new payment terms with suppliers or performing a cash flow analysis.

improving cash positions: the challenge of managing DSO and DPO

According to PYMNTS, data shows that roughly 60% of CFOs are investing in opportunities to improve their cash positions to manage Days Sales Outstanding (DSOs) and days Payable Outstanding (DPOs) most efficiently. As Robert Johnson, senior vice president of payments at Corcentric, told PYMNTS: “Better accounts payable (AP) and AR workflows are critical,” , adding that “as rudimentary as that might sound, it’s key to make sure that payments are being processed as quickly as possible.”

Faster payments and AP and AR automation not only streamline payment operations but also help buyers maximise early payment discount opportunities. That way cash can be redeployed into the business for more strategic opportunities.

Concentrez vous sur l'essentiel EN

Follow the progress of your cash collection

Libeo isn’t only a better way to pay your suppliers, it’s also the best way for you to get paid by your customers

Get a demo

INVOICE MANAGEMENT: How to build a cash flow forecast

Step 1: choose a cashflow time period

First of all, pick the time period you intend to forecast. It can be as short as a few weeks or as long as a few months. Most importantly, it must cover your whole cash flow cycle – the length of time it takes for cash that has left your business to flow back in.

By their very nature, cash forecasts are subject to circumstantial change. It is good policy to review your projections regularly using the most up to minute data. By doing so, you will secure a more accurate estimate and be able to make better management decisions.

Step 2: add up the income

Next, total up all the cash coming into your business for each week or month of the forecast period. You need weekly or monthly amounts for each type of income.

This total is, of course, an estimate, but you can use sales from previous years as a guide. If yours is a new business, make projections based on a realistic figure. It’s best to plan for the worst-case and be pleasantly surprised than to anticipate the best and struggle for funds.

As this is a determination of what cash will be available to you, enter the dates when you anticipate the cash will clear your account, not the payment date.

There may be income separate from sales. Any grants, investments or other fees should be recorded, with individual totals for each income type in any week/month.

The overall total gives you your net income.

Step 3: add up your business expenditure 

Now, follow the same procedure for your outgoings, being sure to total up every anticipated expenditure.

Once again, maintain individual totals by expenditure type for each week/month. The overall amount is your net outgoings.

Step 4: establishing your cash flow

Finally, we get to the dramatic part. Is your cash flow forecast positive or negative?

You can establish this for the whole period, or for each week/month, by subtracting net outgoings from net income. A positive figure forecasts that you will have sufficient cash flow to cover your business’s needs. A negative figure indicates that you are likely to face negative cash flow and have insufficient funds to meet your expenses.

But like we say above, you can use this information to take preventative action by minimising expenses to maximise funds.

Why your invoice payment system is more complicated than it should be

CASH FLOW FORECASTS: How can I do all of this in one click?

Many business owners still labour over a spreadsheet and do both their invoice management and cash flow forecasts manually. But by doing so they risk overlooking an expense or misremembering a payment date. It’s time to embrace easier and near-instant options.

It is now possible, with a single click, to have real-time cash flow forecasts.

How Libeo can revolutionize your cash flow forecasts 

With real-time payment tracking, a running total of payments made and received, and a database of past transactions, Libeo can help you perform cash flow forecasts almost instantly, and with greater accuracy than a spreadsheet.

So if you want to know the future of your cash flow and spend less time on your books, why not have a chat with us? We’d love to hear all about your business and show you how Libeo can help ensure its financial success. 

Étendez votre périmètre d'action EN

Follow the progress of your cash collection

Get paid an average of 8 days faster, and use your cash for your real needs: your growth, teams, and capital investments.

Get a demo


What should a cash flow forecast include?

To create a cash flow forecast, you will need to include:

  • Estimated sales,
  • Projected payment timings,
  • A project of costs.

What is the difference between cash flow and cash flow forecast?

The cash flow statement gives information on the actual finalized accounts for the previous year, whereas the cash flow forecast is a financial planning estimate that covers future changes.

What is the cash flow forecast formula?

Cash flow forecasting is one of the easiest financial formulas to calculate, as it requires no complex financial terms. It is simply a calculation of the cash you expect to bring in and spend over a set period of time. The formula looks like this:

Cash Flow Forecast = Beginning Cash + Projected Inflows – Projected Outflows = Ending Cash.

You will also like

Digital Payments

Digital Payments Are a Matter of When, Not If, CFOs say

Almost universally, CFOs reporting on the state of their companies' cash management have pointed to investments in digital payments platforms as among the biggest changes in the past year. The fact that payments are changing — largely driven by the growth of mobile payment applications and the evolution of B2B payment offerings — is not a revelation, but what most CFOs are seeing has them thinking now is the time to make big decisions about how they will proceed.

7 min

purchase to pay

The Complete Guide To Purchase-to-Pay

Purchase-to-Pay (P2P) is the process of tracking and managing supplier payments for goods and services acquired throughout the year. The Purchase to Payment process is a seamless transaction that involves multiple stakeholders and complex systems.

6 min

 payment cycle

Why small businesses need a holistic view of the payment cycle

As we have said before, cash flow is your company’s lifeblood. Balancing your ingoings and outgoings can sometimes be a tightrope walk, but there’s a way to make a safety net. You can ride out challenges that restrict your access to cash by taking a holistic view of your payment cycle in accounting.

6 min


Libeo is registered by ACPR (Prudential Control and Resolution Authority) under the number 844679068 (approval can be consulted in the Register of Financial Agents – as a payment services agent of the electronic money institution Treezor. Treezor, registered in the Paris Trade and Companies Register under number 807465059, whose registered office is located at 33 avenue de Wagram, 75017 Paris, acting as an electronic money institution within the meaning of Article L.525-1 of the French Monetary and Financial Code and approved by ACPR (Prudential Control and Resolution Authority), is located at 4 Place de Budapest CS 92459 75336 Paris Cedex 09 as an electronic money institution under number 16798, approval which can be consulted on the ACPR website in the Register of Financial Agents (REGAFI):