UNDERSTAND THE CONCEPT
A cash forecast estimates when money will enter and leave the business. The timing differs from the timing of cost recognition: equipment may be received now, invoiced later and paid under agreed terms. Start with opening cash and expected receipts and payments by period. Purchase commitments, open invoices, payroll and project milestones can provide inputs, but each needs an expected cash date and a consistent treatment.
Avoid counting the same obligation as both an open purchase order and an invoice. Update expected payment and collection dates using current information, and distinguish committed amounts from uncertain scenarios. Include currencies and exchange-rate assumptions where they matter. Compare each forecast with actual cash movements to improve timing estimates. Operational teams contribute by communicating delivery changes, acceptance milestones and major procurement decisions early; finance can then assess liquidity needs before those changes become urgent payment requests.
Questions to take back to your team
- Are dates based on expected cash settlement rather than receipt alone?
- Are purchase orders and invoices deduplicated?
- Which uncertain receipts or milestones could change the cash position?
Further reading
Explore the primary references below. Requirements and applicability depend on your organization and jurisdiction.
