Glossary
Cash Flow Forecasting
Cash flow forecasting is the process of estimating the amount of cash a business expects to receive and pay out over a defined future period. It helps treasury teams anticipate funding gaps, plan liquidity reserves, time supplier payments, and decide when to use supply chain finance tools.
What It Is
A cash flow forecast tracks actual cash movements: when money physically enters and leaves the business. It’s different from a profit and loss projection, which records revenue when it’s earned and expenses when they’re incurred. A company can be highly profitable and still face a cash crisis if receivables are slow to collect and payables fall due at the same time.
For businesses using supply chain finance, cash flow forecasting is the foundation for working capital decisions. Knowing that a €2 million payables run is due in 15 days, while €1.5 million in receivables won’t arrive for 45 days, drives decisions about invoice financing, dynamic discounting, or drawing on a credit facility.
Forecasting Horizons
13-week rolling forecast: operational liquidity management; high, transaction-level detail.
6-month forecast: working capital planning; medium, category-level.
12-month forecast: strategic and financing decisions; lower, trend and scenario-based.
3–5 year forecast: capital structure and investment planning; high-level, strategic assumptions.
The 13-week rolling cash flow forecast is the standard tool for operational treasury management. It’s updated weekly, always looking 13 weeks ahead, and provides the granular visibility needed to manage day-to-day liquidity.
The Structure of a Cash Flow Forecast
A complete cash flow forecast captures three categories of cash movement:
Operating Cash Flows
Receipts from customers (based on AR aging and expected payment dates)
Payments to suppliers (based on AP aging and payment terms)