How to Build a 90-Day Cash Flow Forecast
How to Build a 90-Day Cash Flow Forecast
The easiest way to see if your business is financially healthy is by looking at its cash flow. Most business owners focus only on revenue, while cash flow determines whether you will be able to pay employees, cover expenses, and continue operating smoothly. A 90-day cash flow forecast can help you anticipate financial challenges before they become major problems.
What Is a 90-Day Cash Flow Forecast?
A 90-day cash flow forecast is a financial planning tool that estimates the money expected to flow into and out of your business over the next three months. By projecting future cash balances, business owners can identify potential shortfalls, plan for upcoming expenses, and make more informed decisions about future financial endeavors.
Step 1: Calculate Your Current Cash Position
Start by determining how much cash your business currently has available. This includes:
- Business checking and savings accounts
- Cash on hand
- Expected incoming payments that are highly likely to be received
This number serves as the starting point for your forecast.
Step 2: Estimate Incoming Cash
List all expected sources of income over the next 90 days, including:
- Customer payments
- Recurring revenue
- Outstanding invoices
- Other business income
Be realistic with your estimates. If customers typically pay invoices late, factor that into your projections.
Step 3: Forecast Expenses
Next, identify all expected expenses, such as:
- Payroll
- Rent or mortgage payments
- Utilities
- Vendor payments
- Loan or financing obligations
- Taxes
- Marketing expenses
Include both fixed and variable costs to create a more accurate forecast.
Step 4: Calculate Weekly or Monthly Cash Flow
Subtract your projected expenses from your projected income for each week or month within the 90-day period.
Formula: Net Cash Flow = Cash Inflows – Cash Outflows
A positive number indicates surplus cash, while a negative number may signal a future cash shortage.
Step 5: Monitor and Update Regularly
A cash flow forecast should not be a one-time exercise. Update it regularly as new information becomes available. Reviewing your forecast weekly can help you respond quickly to unexpected expenses or delayed customer payments.
Benefits of a 90-Day Cash Flow Forecast
A well-maintained forecast can help businesses:
- Avoid cash flow emergencies
- Prepare for seasonal fluctuations
- Make smarter spending decisions
- Improve financial planning
- Identify financing or restructuring needs early
Final Thoughts
Building a 90-day cash flow forecast doesn't require complicated software or advanced financial expertise. By tracking expected income and expenses, business owners can gain valuable insight into their financial future and make proactive decisions to protect their cash flow.
If your forecast reveals ongoing cash flow challenges or difficulty managing existing business debt, it may be worth exploring restructuring options before the situation becomes more severe.
