Building a rolling cash-flow forecast that supports decisions

Begin with the decision and the opening position

Define what the forecast must answer: whether upcoming payroll is covered, how planned expenditure affects liquidity, or which weeks need closer attention. Choose a horizon and level of detail that match that decision. ACT describes rolling operational forecasts commonly covering 13 weeks, while recognising that circumstances determine the appropriate update frequency.

Establish the starting cash position from current bank records and reconcile it to the ledger. Record items awaiting clearance separately, alongside restrictions on access to balances. A consolidated total should not hide an obligation in one entity or currency that cannot readily be met from another.

Separate expected cash from accounting activity

Prepare distinct receipt and payment schedules. An invoice date, revenue recognition date and expected collection date can differ. Use the expected cash date in the forecast, supported by payment terms, collection information and known disputes. For payments, include approved supplier obligations, payroll, rent, tax dates and planned one-off expenditure relevant to the business.

Assign each significant line an owner, source and last-updated date. Distinguish confirmed obligations from management estimates. Check whether purchase orders and invoices describe the same future payment before combining extracts. More rows provide little benefit if the same cash movement appears twice.

Make uncertainty visible

Use a central case and a small number of clearly explained alternatives. Change identifiable drivers, such as collection timing or an approved project milestone. Avoid applying an arbitrary percentage to every line. Scenarios illustrate possible conditions; they do not predict an outcome or attach a reliable probability without supporting analysis.

In a hypothetical example, a customer may pay after a completion certificate is accepted. If acceptance slips into the following week, the receipt moves while payroll remains unchanged. The useful question is which decision or escalation is needed before that gap occurs, rather than whether the month-end total looks comfortable.

Reconcile before rolling forward

Retain the previous forecast before replacing estimates with actual bank movements. Explain material differences as timing, amount, omission or classification issues. A receipt that arrives later is different from a receipt that is no longer expected. Carry unresolved items forward deliberately and remove movements that have already cleared.

GFOA's liquidity guidance, written for governments, similarly emphasises regular updates and comparison of forecast cash flows with actual results. The transferable discipline is to use each completed period as evidence for improving the next forecast.

Turn the forecast into a management routine

Set a submission deadline, reviewer and decision meeting. Highlight the lowest projected balance, major assumptions, overdue inputs and changes since the previous version. Record agreed actions and owners. A short exception report usually creates a better discussion than an unexplained spreadsheet. Increase review frequency when uncertainty rises, and keep detailed accounting, financing or regulated service decisions with the appropriately qualified people.