How to Create a 12-Month Cashflow Forecast for Your Small Business

What is a cash-flow forecast?

A month-by-month projection of all money coming in (inflows) and going out (outflows). The difference shows whether you'll have enough to cover obligations each month. It's not a profit and loss statement, you can be profitable on paper and still run out of cash if payments don't arrive when you need them.

"Profit and cash are not the same thing, and the gap between them is where good businesses get caught out. A forecast is just the habit of looking at the cash version of the future before it arrives."

Matt Peacey, Founder & CEO, FundTap

Step 1, List your cash inflows

For each month, estimate cash you'll actually receive: customer payments (timed to when they pay, not when you invoice), recurring revenue, GST/BAS refunds, other income. Use realistic timing, if customers take 45 days on average, record the cash in the month it lands.

Step 2, List your cash outflows

Rent and utilities, wages and super, supplier payments, loan repayments, insurance, tax (PAYG, GST, company tax), equipment and vehicles, marketing and professional services, owner drawings.

Step 3, Calculate the monthly balance

Opening balance + Inflows − Outflows = Closing balance. Each month's closing balance becomes the next month's opening balance. A negative closing balance is a gap to address before it arrives.

Step 4, Identify and address gaps

• Accelerate inflows, invoice sooner, offer early-payment incentives, use invoice finance
• Delay outflows, negotiate longer supplier terms
• Reduce costs, cut or defer non-essentials
• Arrange funding, overdraft, loan, or invoice finance as a bridge

Step 5, Update monthly

A forecast is only useful if it reflects reality. Update at least monthly with actuals and re-forecast the remaining months. Predictions sharpen as you learn your patterns.

Common mistakes

• Being too optimistic on timing, use actual DSO, not terms
• Forgetting irregular costs, quarterly BAS, annual insurance, tax instalments
• Not updating, a three-month-old forecast is fiction
• Confusing profit with cash, invoiced revenue isn't cash until it arrives

When the gap is structural

If your forecast consistently shows a gap between invoicing and being paid, it won't fix itself. Invoice finance closes it by releasing the value of outstanding invoices immediately, with FundTap, an advance the same day (median first fund: 3 days from sign-up; FundTap data, 2026), settled automatically when your customer pays.

Frequently asked questions