How to Develop a Reliable Cash Flow Projection?

Effective Ecommerce Accounting for Financial Success with NetSuite

Jan 17, 2023

This blog and its content will help all businesses engaged in different industries to put together a reliable cash flow projection for their businesses with guaranteed success. 

One of the most important factors that any business in this world works for is profits. Every business of every kind has the sole motive of earning more and more by increasing sales and minimizing costs. Although profit is quite important for a business, it’s not everything. An organization may gain a lot of profit, but what still matters is the cash in hand. 

Just because a company is doing extensively well in profits, never means that the same company will never face a shortage of cash in hand or funds if and when the time comes. This is what the cash flow projection helps you avoid. Just like the name, a cash flow projection allows you to ascertain your furniture cash requirements and prepare your business for the worst. 

However, just ascertaining or predicting the future does not mean that you will be able to be successful with your projections. Especially, when it comes to the projection of cash flow, the matter becomes even more vulnerable because of the sensitivity of cash and its related attributes. So, to help you with how to do cash flow projection, in this blog we have offered certain steps and measures that every company, including yours, needs to follow to get a reliable and well-developed projection. Let’s have a look at these steps for further insight. 

How to Project Future Cash Flows: The Best Steps for Cash Flow Projection

So, with the help of the steps provided below, any company, involved in any industry, can easily make a well-informed and trustworthy cash flow projection with ease. 

Learn from the Past

The best way to project cash flow is to learn from the past. Projection alone can never suffice if you don’t consider the factors that have previously affected your state of cash flow. Hence, to develop a successful projection and forecasting accounts payable, you need to consider the factors from the past and devise the projection accordingly. 

For this task, you can take the help of the junior-level finance executives of your company like the controller or the bookkeeper. He/She can be directed to create a report from the past related to deposits and receipts in the business. The business should take care of all the sources and time periods of the receipts for a healthy projection. If the cash flow was affected due to delayed payments and other factors, then the same should also be noticed and taken care of during the cash flow projection. 

Think About the Future

Once you take care of the past and its activities, you now need to think about the future. Before you ask how to project future cash flows, you need to set the definitive requirements for the future. You need to pen down and ascertain where your cash could be spent. This is necessary because once you determine the outflow of the cash, you can compare the same with the inflow and determine the ballpark for the cash in hand with the company at the end of a specific period.

For the cash flow projection of outflows, you need to take into consideration the factors like the money you owe to suppliers, loan installments, etc. This also includes other data like the planned expenditure in the organization. You should not skip the time period or schedule of the payments for a better projection. 

For increased accuracy, a smart businessman should calculate the payroll requirements of the business and dividend/interest payments. For the same, you can take the help of the reports developed by the controller and bookkeeper and include the data-driven form in the projections. 

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Modify and Customize 

The next step of the cash flow projection is the modification stage. Just because you have projected the cash flow for a certain period and date, does not mean you need to head towards the same blindly. A projection is considered smart if you leave the scope of flexibility and modification in it. The business must be able to pave a little from the projection. For this, you need to fix a point or long shot and change the lanes as required. Your sole focus should be on the target and for the same, you may consider skipping the path to reach the same. This is the actual answer to how to project future cash flows more reliably. 

Implement the Readings of the Cash Flow Projection

The last and final stage of the projection cycle is execution. Once you have ascertained the required data from the projection, now you need to implement the same and make amends. For example, the data-driven form of the forecasting of accounts payable and receivables may project that your business will run out of funds during the seventh week, instead of worrying about the same, you should make cutbacks and try out new ways to retain money during that period. 

Never, ever think that you can rely on the money that’s coming in the week succeeding the week of shortage as that is risky business and you may end up losing everything instead of gaining. Be smart about how to use the projections for the good of your business. 

How to Do Cash Flow Projection With Ease: The Conclusion 

We think that with the help of the above-provided sections, you would be able to develop a successful cash flow projection. If you are still confused about the matters related to projections, then connecting with the expert controllers and bookkeepers at The Ledger Labs will help you a lot. Communicate with the experts and allow them to devise a strong projection base for your business that meets your requirements and allows your business to run peacefully and glitch-free. 

Gary Jain


Hi, I am Gary Jain & I help business owners in taking control of their business finances by being a one-stop solution for all their accounting, taxation & CFO advisory needs.

Being an entrepreneur myself, having built and scaled businesses in a variety of domains, has helped me think from the perspective of the business owners and thus bringing in the clarity of the practical problems and their equally practical solutions.

Being from a humble background, I have always valued the importance of conserving resources & I dont like overspending businesses. I advise and work towards tightening the cash outflow tap and making business owners take a very different approach to managing their finances.

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