More small businesses fail from cash flow problems than from a lack of profit. You can be booking jobs, closing sales, and staying busy — and still run out of money if the timing of your income and expenses doesn't line up. A cash flow forecast is the tool that keeps that from happening.
The good news is you don't need an accounting degree to build one. You need a spreadsheet, about an hour, and the willingness to look at your numbers honestly. Here's how to do it.
What Is a Cash Flow Forecast?
A cash flow forecast is a simple projection of when money is coming in and when money is going out over a set period — usually 90 days. It answers one critical question: will I have enough cash in my account to cover my expenses?
It's different from a profit and loss statement, which shows whether your business is profitable on paper. You can be profitable and still be broke if a big invoice isn't paid yet but payroll is due Friday. A cash flow forecast shows you that gap before it becomes a crisis.
List All Expected Income for the Next 90 Days
Go through your open invoices, scheduled jobs, recurring clients, and any contracts in progress. Write down every expected payment and — this is important — when you realistically expect to receive it. Not when you invoice, but when the money actually hits your account.
List All Fixed and Variable Expenses
Fixed expenses are the ones that hit every month no matter what — rent, insurance, subscriptions, loan payments. Variable expenses change month to month — materials, subcontractors, fuel, supplies. List both categories and assign them to the week or month they're due.
Build Your Month-by-Month Grid
Create three columns — one for each month in your 90-day window. Under each month, list your expected income at the top and your expected expenses below. Subtract expenses from income to get your net cash for that month. Then carry the balance forward into the next month.
A Simple Example
| Category | Month 1 | Month 2 | Month 3 |
|---|---|---|---|
| Opening Balance | $8,000 | $6,500 | $9,200 |
| Expected Income | $12,000 | $15,500 | $11,000 |
| Fixed Expenses | ($4,200) | ($4,200) | ($4,200) |
| Variable Expenses | ($9,300) | ($8,600) | ($7,400) |
| Closing Balance | $6,500 | $9,200 | $8,600 |
In this example the business is healthy. But if Month 2 income dropped to $8,000 instead of $15,500, the closing balance would go negative — and that's the kind of thing a forecast lets you see and plan for in advance.
Identify the Gaps and Make a Plan
Look for any month where your closing balance dips below a comfortable minimum — most experts suggest keeping at least one month of operating expenses in reserve. If you see a shortfall coming, you have options: follow up on outstanding invoices, delay a non-urgent expense, or line up a short-term credit facility before you need it.
Update It Every Month
A forecast is only useful if it stays current. At the start of each month, replace your estimates with actuals and roll the window forward. This takes 20–30 minutes once you have the template built, and it keeps you ahead of problems instead of reacting to them.
Always build a conservative version of your forecast using your lowest realistic income estimate. If you can survive the worst-case month, everything else is upside.
"The goal isn't to predict the future perfectly. It's to stop being surprised by it."
The Bottom Line
A cash flow forecast doesn't require expensive software or an accountant. A simple spreadsheet built in an afternoon can give you more financial visibility than most small business owners have. The businesses that use them consistently are the ones that grow with confidence instead of white-knuckling it through slow months.
If you're in Montana and want help setting up a cash flow template tailored to your specific business, AJM Consulting offers a free 30-minute consultation. We'll look at your current numbers and build something you can actually use going forward.
Want a Cash Flow Template Built for Your Business?
Book a free 30-minute consultation with AJM Consulting. We'll set up a simple system that keeps you ahead of your cash every month.
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