How to Manage Cash Flow like a CFO

Cash flow is the amount of money coming in and out of your business over a set period of time. A cash flow forecast is a simple report that shows all the cash you collect from customers and all of the cash you spend to operate your business. It is critical to have accurate estimates for two reasons. The first, we all know, so you can predict if you will be short on cash for operational expenditures. The second however is often overlooked and can be the difference between an adequate business and a great business. Savvy business owners make sure they are consistently managing their cash flow to ensure they do not miss out on growth opportunities because they don’t have the cash to front it.

How to create your first cash flow forecast in six steps:

  1. Determine how far out you’d like for the forecast to run
    We recommend a year for an established business. Determine your projections’ frequency, meaning, do you want to summarize cash coming in and out every week or every month. The higher the frequency, the more work you will have to invest in monitoring your money, but it also allows for more time to pivot your plans if needed.
  2. Write out your opening balance (cash on hand for your business)
    Be sure to include all cash available in all business accounts.
  3. Add all the inflows and outflows of cash at your chosen frequency
    Write out all the cash you expect to collect from customers each week/month (frequency) that will result in money in the bank. Next, write out all the expenses you expect to pay to operate your business like rent, utilities, salaries, loan payments etc. We recommend that you include HST in your cash being collected as well as for the bills you will pay to run the business. This way the amount of money being collected and spent over the coming few weeks/months will match your accounts receivable and accounts payable. Also be sure to add an HST estimate for the periods in which you will need to remit your HST payments.
  4. Line of credit
    If you have an existing line of credit with your bank add the limit to the bottom line of your cash flow forecast. Add the ending balance from the inflows and outflows and the credit limit to give you your available cash balance. If you find that the available cash amount is not enough you need to do two things: 1) review your cash forecast more frequently, maybe even daily, to manage your available cash as tightly as possible and 2) have a hard look at your expenses to see if you can cut costs to preserve cash.
  5. Make sure you are saving for a rainy day
    If you have positive cash every month make sure you have six months of expenses accrued as a separate line item or even in a separate account. Decide how much each month you want to save. Make this a priority. It is good to have savings in case a “what if” scenario happens, such as if a customer didn’t pay you during the month when they were supposed to, or as we’ve all learned lately, a global pandemic.
  6. Monitor, compare and measure predictions to actual results to adjust for future periods regularly
    Go to your bank account to see if the cash you expected to have at the end of the month is there. If the amount is different, determine what was off and adjust. Your ending cash balance of the month will be your opening cash balance for the following month in your forecast, which should include cash needed to pay expenses for the next month.

Whether you have positive or negative cash flow we can assist. Learn more about how we can help you preserve cash or maximize it to make smart investments in your business here. Need to know more? Reach out at