In our recent article, Cashflow forecasting – no longer cloudy with a chance of windfall, we outlined some of the reasons why strong cashflow management is the cornerstone to the success and risk mitigation of any business.  But what is cashflow management and how do you go about it?

What is Cashflow Management?

Cashflow management is the monitoring of a business’ receipts less expenses to ensure that the business can meet its obligations. The key to strong cashflow management is to put in place a cashflow forecast that estimates how much cash a business will have at any point in time based on achieving its target receipts for a given period.

A future cash position forecast can help you navigate your business through any cash flow shortfalls or surpluses, allowing you to budget and plan your expenditure during the quieter months and make decisions on future investment or spending during the stronger months.

An important point to preparing a cashflow forecast is to understand that it is more than just a projected Profit and Loss Statement. A true cashflow forecast takes into account all cashflow obligations, not just your income and expenses. This point leads to the question of how do you go about preparing one?

How do I prepare a Cashflow Forecast?

It is common for simple cashflow forecasts to be prepared in excel and there are a number of free templates available for you to use such as Business Victoria Cash flow forecasting. For more complex forecasts, there are a variety of programs on offer that can link to your existing accounting package and include modelling tools to help you predict a number of what if analysis positions for your business.

There are three key areas that make up a cashflow forecast:

  1. Cash inflows,
  2. Cash outflows; and
  3. The intended goals/targets of the business for the coming period. 

Cash Inflows

Cash inflows capture any funds that your business is planning to receive.  This is made up of more than just your revenue.  It will include interest or other investment income, reimbursements and tax refunds to name a few examples.

Cash Outflows

Cash outflows include any monies that your business is obligated to pay out.  In addition to your operating expenses, payments such as loan repayments, credit card payments, taxes and capital acquisitions will form part of your outflows.

Business Goals/Targets

The intended goals/targets incorporate the plans of the business over the coming period.  In capturing your cash inflows and outflows, targets such as outlining your future revenue activity and growth, expenditure needs to support the revenue activities and capex needs will help to build a forecast that outlines the cash position your business will achieve should these targets be met.

Once in place, your cashflow forecast can be used as a guide to monitor your cash position and keep your eye on the future.  When done right, this should not only keep you out of trouble but help you plan your business’ future.

Fore more information on cashflow forecasting contact your Davidsons team member or email us at

Disclaimer: this information is of a general nature and should not be viewed as representing financial advice. Users of this information are encouraged to seek further advice if they are unclear as to the meaning of anything contained in this article. Davidsons accepts no responsibility for any loss suffered as a result of any party using or relying on this article.