Cash Flow Forecast for Mid-Sized Companies
A cash flow forecast enables mid-sized companies to reliably predict future payments, outflows and liquidity levels. These forecasts provide CFOs and finance teams with a solid basis for investment decisions and effective liquidity planning.
Digital solutions like Financial Navigator support precise, automated and transparent cash flow forecasts giving companies greater visibility into their liquidity position and improving cash management.
What Is a Cash Flow Forecast?
A cash flow forecast is a projection of future cash balances based on expected incoming and outgoing payments over a specific period.
It is essential for forward-looking financial planning and investment decisions. It shows whether a company is likely to have sufficient liquid funds to meet obligations, plan investments and identify bottlenecks early.
For example:
A company expects payments from customers over the next 13 weeks, but at the same time has to make larger payments for salaries, suppliers, taxes and investments. The cash flow forecast shows whether and when a liquidity bottleneck could arise.
What Does a Cash Flow Forecast Show?
The cash flow forecast is a central tool in liquidity planning and treasury management. It answers important management questions such as:
Will liquidity be sufficient for the next weeks or months?
When will cash deficits or surpluses arise?
Which payments have a particularly strong impact on cash flow?
Can investments, suppliers, salaries and loans be paid on time?
How do scenarios such as late customer payments or higher purchasing costs affect liquidity?
How Do You Calculate a Cash Flow Forecast?
The basic formula is:
Opening Balance + Cash Inflows - Cash Outflows = Closing Balance
The closing balance is then used as the opening balance of the next period. Since cash flows are highly dynamic, cash flow forecasts are often updated regularly or prepared on a rolling basis. The steps are as follows:
1. Record the Opening Balance
At the beginning, the opening balance of all relevant bank accounts, cash pools or cash funds is recorded. At the start of the forecast period, the current balances are simply added together.
2. Plan Expected Cash Inflows
Next, all expected incoming payments are consolidated. This includes:
customer payments
open receivables
recurring revenue
financing
tax refunds
investment inflows
These payments form the basis for the company’s liquidity planning.
3. Plan Expected Cash Outflows
Then all expected outgoing payments must be identified. These are often:
salaries
suppliers
taxes
rent
leasing
loan repayments
interest
investments
insurance
It is also important to keep an eye on the payment deadlines for each payment. Payments should be prioritised according to deadline and importance.
4. Analyse Closing Balance and Forecast Deviations
Finally, the closing balance is recorded after each period. This closing balance shows how accurate the forecast was through a plan versus actual comparison.
This value, also known as forecast accuracy, is used to optimise the forecast for the next period and make it more realistic. To obtain the greatest benefit, companies must continuously review and adjust their cash flow forecasts.
Cash Flow Forecast Example for Mid-Sized Companies
A cash flow forecast for a mid-sized company could look as follows:
A mid-sized mechanical engineering supplier with around 90 employees creates a cash flow forecast for the next four months in order to identify seasonal fluctuations and larger individual payments early.
Position | Month 1 | Month 2 | Month 3 | Month 4 |
Opening Balance | €620,000 | €680,000 | €1,130,000 | €710,000 |
Cash Inflows | €950,000 | €1,350,000 | €900,000 | €750,000 |
Cash Outflows | €890,000 | €900,000 | €1,320,000 | €920,000 |
Closing Balance | €680,000 | €1,130,000 | €710,000 | €540,000 |
Cash Inflows:
Months 1 to 3: €900,000 to €950,000 in ongoing customer payments, plus an additional €400,000 final payment from a large project in month 2.
Month 4: only €750,000, seasonally weaker due to the summer break among customers in plant engineering.
Cash Outflows:
Ongoing: around €450,000 to €460,000 in salaries and €380,000 to €400,000 in suppliers/materials and operating costs per month.
Month 3 additionally: €180,000 tax prepayment and €250,000 investment in a new CNC machine.
From month 3: an additional €30,000 monthly loan repayment and interest.
The company maintains minimum liquidity of €500,000. Month 2 looks comfortable because of the large project payment, but the buffer shrinks to only €40,000 in month 4. A single strong month can easily hide the seasonal weakness behind it.
If the decline is only ten percent stronger than planned, the closing balance falls below minimum liquidity. Because the forecast already shows this in month 1, the finance team can take countermeasures early: increase the credit line before the summer break or postpone the investment to a month with stronger liquidity.
What Types of Cash Flow Forecasting Are There?
Depending on the time horizon, objective and business model, companies use different methods for cash flow forecasts. The two most commonly used approaches are direct cash flow forecasts and indirect cash flow forecasts. In addition, rolling cash flow forecasts are being implemented more and more often in order to continuously update the view of liquidity.
Direct Cash Flow Forecast
With the direct method, the cash flow forecast only refers to expected actual incoming and outgoing payments. This means open receivables, liabilities and non-cash profit and loss items are left out.
This method is particularly suitable for short-term periods, such as daily, weekly or 13-week forecasts. It is often used to secure solvency for suppliers, salaries, taxes and loan instalments.
Indirect Cash Flow Forecast
The indirect method often starts with income statement, budget or balance sheet data and derives future liquidity development from it. The planned result is adjusted for non-cash items, such as depreciation or provisions, and for changes in working capital, such as receivables, inventories and liabilities.
This creates a picture of how the cash balance will develop over several months or years, without planning every single payment in detail.
Indirect cash flow forecasts are more suitable for medium- and long-term financial planning, for example for budget planning, investment decisions or financing discussions with banks.
Rolling Cash Flow Forecast
A rolling cash flow forecast is updated regularly, often weekly or monthly, in order to always provide forecasts based on the latest data. It continuously extends the planning horizon and allows CFOs to maintain an overview of the cash flow forecast at all times.
In practice, rolling cash flows can usually only be implemented with Treasury Management Software that automatically updates data and payment balances.
Which Forecast Periods Make Sense?
In liquidity planning, it is common to create short-term, medium-term and long-term cash flow forecasts. The reason is that each time horizon has different priorities and is viewed from a different perspective.
Short-Term Cash Flow Forecast
A short-term cash flow forecast deals with operational solvency. It forecasts the next days to weeks and focuses on current account balances, payment runs, salaries, suppliers and taxes.
This gives finance teams a view into the near future, allows them to plan payments and helps avoid cash bottlenecks.
Medium-Term Cash Flow Forecast
A medium-term cash flow forecast focuses on the coming 13 weeks to six months. In this time period, the forecast primarily serves as an early warning system. The focus is on working capital management, seasonal fluctuations, credit lines and scenario planning.
Through this cash flow forecast, finance teams gain more predictable reaction time for payments and liquidity bottlenecks.
Long-Term Cash Flow Forecast
A long-term cash flow forecast serves strategic decisions and long-term liquidity strategy. It forecasts one to five years into the future. It supports decisions around investments, growth, financing and expansion and provides insights into the company’s capital structure.
For CFOs, the long-term cash flow forecast is one of the most interesting, as it allows them to assess strategic decisions with a liquidity impact.
What Is a Cash Flow Forecast System?
A cash flow forecast system is a digital solution that significantly simplifies and automates the forecasting process. Bank data, ERP data, open items, payment plans, budget data and forecast logic are brought together centrally and do not have to be manually collected across several systems.
Central Data Basis
A cash flow forecast system creates a central database. In one single platform, it offers the necessary overview of:
bank accounts
ERP connections
accounting systems
open receivables
liabilities
payment plans
budgets
Automated Forecast Creation
Cash flow forecast software reduces manual work and its high susceptibility to errors within a company. It automatically takes recurring payments, historical patterns, open items and plan values into account.
This means the data within the platform is always up to date and does not have to be manually reconciled and entered. This leads to more precise forecasts and less time spent in the creation process.
Scenarios and Plan-Actual Comparisons
Digital solutions turn forecasting from a static table into a centralised management process. Software such as Financial Navigator enables the simple creation of:
what-if scenarios
early bottleneck detection
forecast accuracy
variance analyses
Reporting for CFOs and Finance Teams
A central database combined with automated forecasts and analyses, also enhances reporting. Liquidity planning software allows the simple creation of:
dashboards
management reports
liquidity overviews
In addition, different roles and access rights can be assigned, and reports can be shared quickly and clearly using export functions. This improves internal coordination and decision-making because important data is made available quickly, accurately and clearly.
Cash Flow Forecast Template: Why Excel Is Only the Beginning
In mid-sized companies, cash flow forecasting and liquidity planning often still run through Excel lists and many manual work processes. When getting started with cash flow forecasts and projections, Excel templates can be very helpful. However, as the company grows and the payment structure becomes more complex, they quickly reach their limits.
When an Excel Template Is Enough
A cash flow forecast in Excel can be enough for liquidity planning as long as complexity remains low. Typical examples are:
smaller companies with a lean organisation
few bank accounts and clear money flows
simple, recurring payment flows
low need for frequent forecast updates
When Excel Becomes a Risk
As a company grows, pure liquidity planning with Excel quickly becomes a pain point. This is because the company now works with:
several bank accounts
several entities
A large number of open items
With manual data maintenance, issues such as inconsistent file versions and high reconciliation efforts can quickly arise. Forecast creation becomes more time-consuming, and access to real-time data is limited.
Why ERP Systems Alone Are Often Not Flexible Enough
ERP systems contain important data and often manage a company’s core processes. For practical liquidity planning, however, they are often too slow, too rigid and too complex for operational use to meet requirements.
A Treasury Management System complements ERP systems with exactly these functions and can be rolled out quickly via existing ERP connections. A cash flow forecast system can be set up quickly, enabling more accurate liquidity planning and cash management.
What Are the Benefits of an Automated Cash Flow Forecast?
Automated cash flow forecasts are not only useful for those who have to create them. They offer benefits for CFOs, finance managers and controlling.
Liquidity bottlenecks are identified early and countermeasures can be taken.
Decisions on investments and financing are based on up-to-date, relevant data.
CFOs can identify when the company has the financial flexibility to act.
Automatic data flows reduce manual errors and improve forecast accuracy.
Dashboards and reports replace manual consolidation.
Transparency over bank accounts, cash positions and payment flows becomes centrally visible.
Collaboration between finance, controlling and management improves and all teams work with consistent data.
Automating Cash Flow Forecasts With Financial Navigator
Financial Navigator is a modern platform for liquidity planning, cash management and treasury management. As a specialised cash flow forecast software, it bundles data from banks and ERP systems, displays liquidity in real time and supports planning and management.
With integrated liquidity planning software and Treasury Management System functions, Financial Navigator automates recurring tasks, increases cash transparency and creates a reliable basis for decisions.
Financial Navigator offers more than 13,000 bank connections in more than 30 countries. It also achieves cash transparency of more than 98% for customers and has already saved more than 10,000 hours in financial administration.
Automatic Bank and ERP Connection
Bank accounts, ERPs and other finance systems can be easily integrated. This automatically updates the data basis and improves forecasts. Manual data collection is reduced, along with high time effort and risk of errors.
Real-Time Cash Transparency
Financial Navigator enables a central and current view of:
current account balances
incoming and outgoing payments
available liquidity
forecast developments
This gives CFOs and finance managers an immediate basis for decision-making.
Forecasts, Scenarios and Reporting in One System
With Financial Navigator:
forecasts can be created precisely and updated continuously.
Scenarios can be compared clearly.
Plan versus actual deviations can be analysed.
Reports can be created for management or stakeholders.
The solution can be used ideally as a management platform for liquidity planning and treasury management.
Scalable for Mid-Sized Finance Teams
Treasury Management Systems are not only aimed at large corporations. Financial Navigator is ideally suited for growing and mid-sized companies. Through modular implementation, it can be rolled out step by step across several accounts, locations, entities and complex treasury processes.
Who Is Cash Flow Forecasting With Financial Navigator Suitable For?
CFOs, finance managers and controlling teams use cash flow forecasts for different tasks within the finance department. Financial Navigator manages this through role-based access control: each person only sees the views and functions that are relevant to their role.
CFOs
CFOs are among the most important decision-makers in any company. They make decisive decisions on investments and financing and assess risks. Financial Navigator supports strategic liquidity management, cash visibility and stakeholder reporting.
Finance Managers
Finance managers manage day-to-day financial operations and working capital. Operational forecasts and daily liquidity overviews are essential. Financial Navigator enables fast and accurate forecasting and an overview of bank accounts, payment runs and outstanding receivables and payments.
Controlling Teams
Controlling teams use Financial Navigator's analytical capabilities to monitor financial performance and improve planning. The software automatically generates plan-versus-actual analyses, budget comparisons, forecast accuracy reports, and scenario analyses, ensuring high data quality with minimal manual effort.
Management in Mid-Sized Companies
For management teams in mid-sized companies, Financial Navigator provides a clear overview of the company's financial flexibility. Investment opportunities and potential bottlenecks become visible earlier and liquidity planning becomes more precise.
FAQ: Cash Flow Forecast
What is a cash flow forecast?
A cash flow forecast is a projection of a company’s future cash balances based on expected inflows and outflows over a specific period. It helps mid-sized companies determine early whether their liquidity is sufficient to cover upcoming obligations.
How do you calculate a cash flow forecast?
The basic formula is: Opening Balance + Cash Inflows - Cash Outflows = Closing Balance. The closing balance becomes the opening balance of the next period.
What does a cash flow forecast show about a company’s liquidity?
The cash flow forecast shows which periods liquidity bottlenecks or surpluses will potentially arise and whether all payment obligations can be met on time. This makes financial flexibility more clear.
What are the two types of cash flow forecasting?
The two most commonly used approaches are the direct and indirect methods. The direct method plans actual payment flows, while the indirect method derives cash flow from balance sheet and profit and loss data.
What is a cash flow forecast system?
A cash flow forecast system is a digital solution that automates forecasting. Bank data, ERP data, open items and forecast logic are brought together centrally instead of being collected manually from several systems.
When is a cash flow forecast template in Excel no longer enough?
Excel templates are helpful for getting started. As the business grows, multiple bank accounts, manual data entry, version control issues and limited visibility into forecast accuracy are added, can make excel spreadsheets difficult to maintain.
Why is a cash flow forecast important for mid-sized companies?
A cash flow forecast helps mid-sized companies maintain liquidity and creates transparency for investment and financing decisions.
How does Financial Navigator support cash flow forecasts?
Financial Navigator connects bank accounts and ERP systems into automated cash flow forecasts. Real-time dashboards, scenario planning and flexible reporting give finance teams full transparency.
Digitalise Cash Flow Forecasting Now
A reliable cash flow forecast determines whether mid-sized companies identify liquidity bottlenecks early or are only surprised by them in an emergency.
With a precise cash flow forecast and modern liquidity planning software, manual reconciliation between banks, ERP and Excel tables becomes a thing of the past.
Create precise cash flow forecasts based on current data. Automated, transparent and scalable with Financial Navigator.
Optimise Your Treasury Management
Do you want a modern Treasury Management System that meets your requirements? Financial Navigator supports you in centralising your financial processes with real-time transparency, automated forecasts, seamless bank integration. Fill out our demo form and speak with our experts!