Cash flow projection

Formula

How it works

Each month adds that month's cash in and subtracts its cash out. From month 2 the inflow and outflow grow by their monthly growth rates. The lowest balance shows when you are closest to running short of cash.

Worked example

The same calculation with the default values:

• Opening cash 20,000
• Cash in, month 1 15,000
• Cash out, month 1 14,000
• Monthly growth of cash in 2 %
• Monthly growth of cash out 1 %
• Months to project 12 months

1. closing cash(1) = 20,000 + 15,000 − 14,000 = 21,000
2. cash in(m) = cash in(m − 1) × (1 + 2%) cash out(m) = cash out(m − 1) × (1 + 1%)
3. closing cash(n = 12) = 43,626.303737

Result: Closing cash: 43,626.30 USD · Total cash in: 201,181.35 USD · Total cash out: 177,555.04 USD

Common mistakes

• Projecting inflows at their full invoiced amount without accounting for late-paying customers - cash actually received is often later and sometimes less than what was billed.
• Forgetting to include irregular but predictable outflows (annual insurance, quarterly taxes) just because they don't happen every month - leaving them out creates a cash crunch in the month they actually hit.
• Treating a projection built from assumptions as a guarantee - this shows what happens if the entered inflow/outflow figures hold true, not a forecast that accounts for everything that could change.