Cash flow projection

Project your bank balance month by month for up to 12 months and see when cash gets tight.

What you enter

  • Opening bank balance – Cash in the bank at the start of month 1. Can be negative if you are in overdraft.
  • Sales in month 1 (ex GST) – Expected sales invoiced or rung up in the first month.
  • Monthly sales growth – Average change in sales from one month to the next. Use a negative number for a decline.
  • Share of sales paid in the same month – The rest is assumed to be paid the following month. Use 100% for cash or card sales.
  • Variable costs as % of sales – Stock, materials and other costs that rise with sales, paid in the month of the sale.
  • Fixed costs per month – Rent, wages, loan repayments, subscriptions and other regular outgoings.
  • Months to project – Between 1 and 12 months.

How it is calculated

For each month: Sales = Month 1 sales × (1 + growth)^(month − 1). Cash in = Sales × same-month share + Last month’s sales × (1 − same-month share). Cash out = Sales × variable cost % + Fixed costs. Closing balance = Opening balance + Cash in − Cash out.

Assumptions

  • Sales grow (or shrink) at a steady rate each month.
  • Customers who do not pay in the month of sale pay in full the next month; there are no bad debts.
  • Invoices raised before month 1 are not included in cash in.
  • Variable costs are paid in the month of the sale and fixed costs every month.
  • GST, BAS payments, income tax and one-off purchases are not modelled; add them to fixed costs in the months they fall if they matter.

Limitations

  • Real businesses are seasonal. For a detailed forecast use the cash-flow forecast template, which lets you enter every month separately.
  • This is a planning estimate, not an accounting record.

Related articles

  • Cash flow management – Why profitable businesses run out of money, how the cash conversion cycle works, and the weekly habits that keep enough cash in the bank to pay staff, suppliers and the ATO on time.
  • Budgeting and forecasting – How to build an annual budget you will actually use, keep a rolling forecast that reflects what is really happening, and use the gap between the two to make better decisions each month.
  • GST, BAS and taxation fundamentals – How GST works, what a Business Activity Statement actually reports, how PAYG withholding and instalments fit in, and the habits that make the ATO a routine supplier rather than a source of dread.