How To Do A Cash Flow Projection

What is a cash flow projection?

Cash is king, and if you want to position your business for success, you need an accurate cash flow projection in your toolbox. That’s because knowing how to put together a reliable cash flow projection is like creating a financial roadmap for your business, combining insights from historical data, along with your own assumptions about the future, to show you exactly when cash is coming and going, as well as what your bank balance will be at different points in the future. 

Some cash flow projections look like a typical cash flow statement, and others are designed to illustrate cash movements in different ways, but they should all tell you the same basic information:

  • When cash will come into your business, and how much
  • When cash will exit your business, and how much
  • What your bank balance will be at different points in the future
  • What is driving those cash movements

Knowing how to properly create a projected cash flow statement can be incredibly powerful for your business. However, many businesses don’t build or maintain their cash flow projections, either because they don’t have the time, they don’t know how, or they don’t think they need one. That’s a problem.

Why are cash flow projections important?

82% of small business failures are due to cash flow issues, so staying on top of cash flow is a big deal for entrepreneurs and small business owners. By the time you notice cash flow issues on performance reports, all you can do is react and hope it’s not too late, so it’s important to manage your finances with a forward-looking perspective. 

With an accurate and up-to-date cash flow projection, you can spot opportunities and problems ahead of time, be more proactive, and learn more about your business with answers to questions like:

  • Do I have any cash shortages or surpluses on the horizon?
  • What’s driving my bank balance week-to-week?
  • Who owes me money? And who do I owe?
  • What are my options for optimizing cash flow and profitability?
  • How would decisions like hiring more staff, getting a loan, or changing the product/service mix impact my future finances? 
  • What would happen to my business in the best and worst case scenarios, and how can I better prepare?

In short, cash flow projections bring a whole new level of visibility into your business, empowering you to plan ahead with more confidence, avoid costly mistakes, and manage your finances with fewer surprises.

So, how can you get your hands on one?

Building a cash flow projection

Large companies hire CFOs and teams of analysts to build financial models, cash flow forecasts, and scenarios for decision making, but small businesses usually don’t have the resources to bring on full-time staff in FP&A roles. That means business owners typically do their own financial planning and analysis in spreadsheets or cloud-based software tools.

Regardless of the tools used, a complete and accurate cash flow projection needs to account for these key building blocks:

  • First, you’ll need a financial model based around historical trends, key business drivers, and your own assumptions/expectations about future revenues and expenses - i.e. a forecasted income statement
  • Next, it’s important to translate your revenue and expense forecasts to work out the true cash impact of all that activity. This is where you start building the actual cash flow forecast, which reflects the specific cash timing behavior that’s unique to your business - e.g. invoicing and billing activity, collection and payment patterns, etc.
  • Once that’s all dialed in, you can add information around any other investing and financing activities that will use or create cash in the future (e.g. loans, asset purchases, dividends, etc.), so you have a complete picture of how money moves around your business, and what to expect going forward, all in one place.

To take it to the next level, you can also build separate “what if” scenarios to experiment with different assumptions about the future (e.g. best/worst case) or explore potential business decisions to see how your finances react. 

cash flow forecast

But first things first, you’ve got to nail the baseline model so you don’t end up with inaccurate or misleading projections. Most software tools can provide some time savings, but they typically lack one or more of the foundational building blocks listed above, and implementation can be a nightmare. Spreadsheets are readily available and offer more flexibility, but building a complete financial model and cash flow forecast by hand comes with its own set of challenges.

The process of entering numbers and building formulas by hand is error-prone, and with the sheer amount of financial data your business generates, it’s easy to miss patterns and insights that are key to modeling your business correctly. On top of that, that data in spreadsheets is never real-time, so each time you look at your model, you’ll need to update the numbers to reflect any changes, adjust your formulas, and transfer all that new information over to any alternate scenarios/models you’re working with. Quite honestly it’s a lot of work, but I have some good news: thanks to advances in cloud technology, there’s now a muchbetter way to forecast cash flow. 

The future of cash flow forecasting

Cloud-based accounting systems (like QuickBooks Online and Xero) hold a wealth of financial data about your business, and when that information is processed in real time with AI and machine learning technology, you can get incredibly accurate financial models and cash flow forecasts at your fingertips in a matter of minutes, with basically zero setup required. It might sound too futuristic and out-of-reach, but Clockwork is a cloud-based software tool which already exists to do just that.

Instead of fumbling around in spreadsheets, you can simply connect Clockwork to your accounting system and let our AI-powered platform do the work for you. Clockwork automatically learns from your accounting data to build a custom financial model, and an incredibly accurate cash flow projection that reflects all of the quirks and unique patterns in your business, without any setup required. Adjusting assumptions and creating unlimited scenarios is effortless, and because Clockwork is always in-sync with your accounting system, you’ll always see your business in real time.

With a simple and easy-to-use interface, Clockwork lets you immediately see your complete projections and get CFO-level insights into key financial drivers, saving you an enormous amount of time, and putting you in the driver’s seat of your business from moment you connect.

Why Clockwork?

Clockwork is unlike anything else on the market today because of who we are. We’ve grown up in family-owned businesses, worked at growing companies, and lived the struggles of entrepreneurship. We’ve also built more financial models and cash flow forecasts than you’d believe, having worked in corporate strategy and FP&A teams, hedge funds, and CFO roles throughout our careers. After seeing the huge disparity between large companies and small businesses when it comes to financial planning and analysis, we knew something needed to be done to level the playing field, so we built Clockwork. 

financial model


We’re not here to peddle cheap automation and dashboards like you might see elsewhere. Clockwork is the only tool that gives you a complete picture of your finances and projections with this level of accuracy, but most importantly, we’re in your corner. You’ll never pay a dime for training or support, and our experienced team is always available to walk through your models, talk through your business challenges, and even brainstorm improvements to the platform - whatever it takes to help you succeed.

Simply put, Clockwork is on a mission to empower you with best-in-class tools and insights so you can easily manage your finances and sleep better at night. 

Contact us to learn more, or just start a free trial and see for yourself!