Cash flow forecast guide: how to predict, plan, and protect your business

It is critical for businesses to get cash flow forecasts right.

According to Agicap's 2025 survey of US mid-sized companies, the average cost of unreliable cash flow forecasts amounts to $465,000 annually.

And that’s just the baseline. The true cost lies in missed opportunities and unmanaged risk. Without a clear view of future cash positions, CFOs and leadership teams are effectively flying blind, unable to prepare for unexpected cash shortfalls, rising interest rates, or economic shocks.

Shockingly, 43% of US mid-market companies admit to relying on unreliable forecasts—leading to unexpected cash deficits of over $50,000 every 20 days.

The underlying issues? Poor inventory visibility, underestimated business complexity, and overreliance on outdated tools like spreadsheets. With so much at stake, improving your cash flow forecast isn’t just smart—it’s essential.

What is cash flow forecast?

Cash flow forecast simply means predicting what the net balance of a company will be in the future. Just as with a Profit and Loss Statement, forecasting reconciles projected cash inflows and cash outflows to arrive at a net figure of cash position. There are many ways of doing it, as Harvard Business School are right to point out.

The accuracy of the forecasting depends largely on the timeframe involved; typically, businesses divide cashflow forecasting into 3 timeframes:

1. Short-term cash flow forecasting: managing liquidity day-to-day

For many companies without dedicated software, it is simply too much effort to look at the next month's cash position when it will be upon the company so soon anyway.

Short-term cash flow predictions are vital, though, for managing liquidity - ie. meeting financial obligations - as well as operational agility. If a company wants to respond quickly to unexpected financial crisis, it needs to know it is just around the corner.

2. Medium-term cash flow projection: the CFO's favourite

Agicap research shows that CFOs who do work with cashflow forecasts tend to favour a rolling 13-week forecast. This timeframe incorporates some ability to deal with unforeseen circumstances, as well as supporting the efficient scheduling of major expenditure. Also handled in this time horizon is the management of debts (ie. paying off loans or extending credit).

A key difference between a shorter timeframe of less than 13 weeks and a medium-term timeframe extending out to a year is that there is more time to model different scenarios with the latter. With dedicated software like Agicap, cashflow scenario models can be instantly created to show the financial impact of predicted events like new contracts, seasonal swings in sales, new hires and even bigger strategic decisions like business expansions. These models can then be compared against each other, or against the actual cash position reached.

3. Long-Term cash flow prediction: plan for growth and financing needs

The long-term view extends out from a 12-month forecast. Of course, the further out the prediction goes, the less accurate it is likely to be. But some forecasting capability is vital for fundamental business credibility: investors and lenders, for example, expect it. Naturally too, businesses will only be able to make plans for their growth as well as plans to mitigate financial risk if they are armed with information (however speculative).

Cashflow forecast: tools & techniques

Accurate cashflow forecasting isn't just a finance project; it's a risk management priority which offers a company resilience and agility. The need, therefore, for accurate cash flow forecasting tools and techniques could not be greater.

Cashflow forecasting tools

Businesses have two choices when it comes to cashflow forecasting - manual or automated:

• Manual forecasting: use spreadsheets (Excel/Google Sheets).
• Automated forecasting: use dedicated cash forecasting software like Agicap.

Cash flow forecasting techniques

Whether manual or automated forecasting is used, there are two main techniques:

• Direct: use aggregated data from bank accounts relating to Accounts Payable as well as Accounts Receivable to make short-term predictions.
• Indirect: Take assumptions and variables from financial statements like P&L to make longer-term predictions.

Why manual cash flow forecasting falls short

Doing forecasts by hand using Excel is what many businesses are used to. But the problems are well-known:

• High error potential (via mistyping/faulty formulas).
• No automation.
• Limited scalability - and this is particularly an issue for companies with a Group structure trying to integrate forecasts from multiple subsidiaries.

Agicap client White Rabbit (a UK-based restaurant incubator) saved themselves a day's work a week by switching from spreadsheets to Agicap's automated consolidation of cashflows.

Dedicated software: the best tool for cash flow forecast

With Agicap's cashflow planning tool, it only takes a few clicks to:

• Automate and unify a rolling forecast.
• Convert your forecast P&L statement into a cash forecast with our custom converter.
• Import your budget from your spreadsheets with our dedicated Excel plugin.

Business cash flow forecast: example

Let's compare the direct and indirect techniques of forecasting with a brief example.

Agicap serves many retail companies. Often working with seasonal highs and lows when it comes to revenue, retailers are especially reliant on accurate cash forecasting.

Using direct forecasting in the short-term, Agicap would connect to the retailer's bank accounts and invoicing systems (both AP and AR) to pull live data; with today's customer payments (cash inflows) checked off, next week's supplier payments (cash outflows) can be reviewed, and a forecast made to check the wages can be paid at the end of the month.

Using indirect forecasting over the longer term, the retailer might want to know whether they can afford to open a new store next year. Agicap software would use key variables factored from historical aggregated data - like projected sales growth, for example, estimated tax payments and depreciation of store fittings - to create an indication of how much cash would be available to invest.

Benefits of cashflow forecast - and how Agicap helps

The advantages of cash flow forecast are well-known:

• Manage shortfall risk - ensuring the company can pay its way is the primary function of cashflow forecasting.
• Spot issues with payments from particular suppliers coming in late, and errant costs going out.
• Stress-testing: it is impossible to test different business scenarios without a projection of cashflow.
• Plan investments more efficiently.

However, traditional forecasting methods have limitations. In the short term, even forecasts using live data can’t predict events with 100% accuracy. Long-term forecasts become less reliable the further they extend, as they rely on previous projections.

This is where Agicap stands out. By automating cash flow consolidation, connecting directly to bank accounts and invoices, and enabling real-time scenario modeling, Agicap reduces errors and improves accuracy — helping businesses stay agile and informed despite forecasting uncertainties.

Ready to see the difference? Book a free demo with Agicap today to discover how our platform can help you reduce errors, save time, and make confident financial decisions.

Practical cash flow forecasting tips for CFOs

• The two quickest wins for accurate forecasting according to Agicap research: i) if you are a Group structure, ensure your subsidiaries are providing cashflow forecasts using granular data and uniform processes ii) harmonise credit terms with suppliers.
• Educate your Board: cash forecasting is about risk management, not about accounting.
• Integrate all forecast timeframes: you will be in reactive mode all the time unless you use short-, medium- and long-term forecasts in a unified way. Use short-term forecasts to deal with immediate risk, medium-term forecasts to nip potential shortfalls in the bud, and long-term forecasts to give your CEO and Board a gold-plated information service to underpin their decision-making.

Frequently Asked Questions (FAQs)

What is the meaning of cash flow projection?

A cash flow projection is a cash flow prediction. It means predicting how much cash will be available to a business in the future - which is crucial for good cashflow management.

What is a 12 month cash flow forecast?

A 12 month cash flow forecast would typically be considered to be a long-term cash flow forecast; a 13 week forecast would be considered medium-term, and a 4 week forecast short-term.

How to read cashflow forecast?

Cashflow forecasts are typically easy to read. Whether they are created manually in Excel or automatically via a software package, the end result centres on a single figure showing the balance predicted for the business. (This could be negative cash flow or a positive cash flow figure).

What is a cash flow forecast?

A cash flow forecast shows how much cash will be available to a business at a given point in the future. The cash available is calculated using either real data (with the direct method) or projections based on balance sheets (with the indirect method).

Why is cash flow forecasting important?

Without accurate cash flow forecasts, businesses cannot make big positive decisions about their future. How could they, when they have no idea how liquid they will be? Critically, companies which haven't been forecasting cash are vulnerable to unforeseen events forcing them to go into debt or even bankruptcy.

How do you calculate a cash flow forecast?

There are two ways in which businesses calculate a cash flow forecast: direct and indirect. The direct method forecasts on the basis of actual cash transactions; whereas the indirect method uses projections from financial statements.