How to create a cash flow projection (with examples)

Cash flow projection provides a window into your company's financial future. It helps you predict exactly when money will enter and leave your business, providing a detailed estimate of your company's future cash position.

This guide walks you through creating projections that actually work, covering both the fundamentals and advanced techniques.

What is a cash flow projection?

A cash flow projection forecasts your future cash inflows and outflows over a specific period, typically ranging from 13 weeks to 12 months. It estimates your cash balance at any given point, helping you identify shortages that could prevent paying bills or surpluses you can invest.

Think of it as your financial early-warning system. By mapping out when customers will actually pay you and when bills come due, you can spot cash crunches weeks in advance. This visibility lets you secure financing, delay purchases, or accelerate collections before problems arise.

Cash flow projections are essential for meeting payroll, paying vendors on time, and making smart investment decisions. Banks and investors also require them when evaluating loan applications or funding requests since they demonstrate your ability to manage cash and repay obligations.

When you actually need a cash flow projection

Certain business situations demand immediate cash flow visibility. Recognizing these warning signs helps you put together a projection before problems develop:

• Your bank balance drops below 2 weeks of operating expenses
• Customer payments arrive later than 45 days on average
• You're considering a major purchase or expansion
• Sales are growing faster than 20% quarter over quarter
• Your business has pronounced seasonal swings

Seasonal businesses need projections to survive slow periods and prepare for busy seasons. For example, a landscaping company must plan for the winter months, when revenue drops but fixed costs continue. Rapid growth phases create their own cash challenges: You're paying for inventory and labor today to support sales you won't collect for 30–60 days.

Upcoming loan applications and investor meetings also require cash flow projections. Lenders want proof that you can service debt, while investors evaluate whether you understand your cash dynamics. Having an updated projection demonstrates financial discipline and reduces perceived risk.

Data you need before projecting cash flow

Accurate projections require solid baseline data from your accounting records and bank statements. Gathering this information up front saves time and improves reliability:

• Current cash balance across all accounts
• Accounts receivable (AR) aging report, showing who owes what and when
• Historical sales patterns from the past 12 months
• Recurring monthly expenses (rent, payroll, subscriptions)
• Accounts payable (AP) report, with payment due dates
• Customer payment terms and actual payment history
• Vendor payment terms and discount opportunities
• Scheduled one-time expenses (equipment, taxes, insurance)
• Signed contracts and purchase orders
• Credit availability and terms

Export the last 3 months of data to start identifying patterns. For your AR reports specifically, note which customers pay early, on time, or consistently late. This historical behavior predicts future payment timing better than stated terms.

Steps to build a cash flow projection

Once you’ve gathered the right data, the next step is turning those numbers into a forward-looking view of your cash position. Following a step-by-step process will help you structure your projection so it’s both accurate and easy to maintain over time.

Step 1: Choose weekly or monthly cadence

Weekly projections work best for cash-tight situations where every day counts. If you're managing payroll closely or have less than 30 days of cash, weekly visibility prevents surprises. The 13-week rolling format has become standard because it provides 3 months of forward visibility while remaining manageable and accurate.

Monthly projections suit stable businesses with predictable cash flows and healthy reserves. They require less maintenance and provide enough detail for most planning needs. Companies with 60+ days of cash and consistent payment cycles can rely on monthly views.

Consider your cash volatility when choosing. Businesses with large, irregular payments need weekly tracking to avoid temporary shortfalls between big collections.

Step 2: Pull historical cash inflows

Start by analyzing your actual cash receipts from the past 3–6 months. Don't use sales figures; focus on when cash actually hits your bank account. This reveals the real delay between invoicing and collection.

Group inflows by source: customer payments, loans, investment income, tax refunds, and other receipts. Calculate the average collection period for each customer segment.

Apply these historical patterns to project future collections. If 60% of invoices typically get paid within 30 days and 30% within 45 days, use these percentages for your projection. Adjust for known factors like seasonality or customer-specific payment habits.

Step 3: Estimate upcoming cash outflows

Fixed expenses form your baseline since they're predictable and required. List rent, salaries, insurance, loan payments, and subscriptions with their exact payment dates. These rarely change from month to month.

Variable costs fluctuate with business activity. Include inventory purchases, sales commissions, shipping costs, and contractor payments. Base these on your sales projection and historical cost ratios.

Don't overlook irregular expenses that can drain cash unexpectedly. Quarterly taxes, annual insurance premiums, equipment maintenance, and professional fees often surprise businesses. Review last year's expenses to catch these items.

Step 4: Layer in timing and payment terms

Your payment terms create the gap between transactions and cash movement. A sale today with net 30 terms means cash arrives next month. Similarly, inventory purchased on net 45 terms delays cash outflows.

Map out your standard payment terms for both customers and vendors, then adjust for reality. For example, if customers with net 30 terms typically pay in 40 days, use 40 days in your projection. Include early payment discounts you might take or offer.

Consider payment methods, too. ACH transfers can take 1–3 business days, while credit card payments might clear overnight. Wire transfers provide same-day funds but cost more. These timing differences matter when cash is tight.

Step 5: Calculate opening and ending balances

The math here is simple:

Ending balance = Opening balance + Inflows – Outflows

Each period's ending balance becomes the next period's opening balance, creating a rolling view of your cash position.

Start with your actual current balance, not what your accounting system shows. Include outstanding checks and pending deposits to reflect true available cash. This prevents projecting from an incorrect starting point.

Track the running balance carefully. A positive ending balance one week doesn't guarantee you’ve successfully avoided any problems. For example, check whether the balance went negative mid-period before a big payment arrived.

Step 6: Run best-, base-, and worst-case scenarios

Your base case uses realistic assumptions grounded in historical data. This becomes your primary planning tool and most likely outcome.

The best-case scenario assumes faster collections, higher sales, or delayed expenses. Maybe your biggest customer pays early or that equipment purchase gets postponed. This shows your upside potential and investable surplus.

Worst-case planning prevents disasters. Assume major customers pay late, sales drop 20%, or unexpected expenses hit. If this scenario breaks your business, you need contingency plans like a credit line or payment arrangements.

Cash flow projection formats and templates

Different formats serve different business needs. Choose based on your cash management requirements and planning horizon.

Weekly 13-week cash flow projection template

The 13-week format provides detailed short-term visibility ideal for active cash management. Structure it with weeks as columns and cash categories as rows.

This format highlights weekly fluctuations and pinpoints exact dates when cash might run short. Update it daily during critical periods.

Monthly 12-month projected cash flow statement template

Monthly projections support annual planning and budgeting with less granular detail. They work well for stable businesses and strategic decisions.

Include separate sections for operating, financing, and investing activities. This matches standard cash flow statement format and makes it easier to compare projections with actual results.

Simple one-page cash flow projection template

Small businesses often need just the essentials. This format fits on one page and covers critical cash movements without overwhelming detail:

Focus on categories that matter most for your business. Combine smaller expenses into "Other" to maintain simplicity while tracking the big items that drive cash flow.

How to improve accuracy and avoid common pitfalls

Most cash flow projections fail because of overly optimistic assumptions or irregular updates. These best practices can dramatically improve the reliability of your projections:

Tighten AP and AR assumptions

Your AR aging report provides the foundation for accurate collection estimates. Don't assume published payment terms; measure actual payment behavior. Pull payment history for your top customers and use it to inform your projection.

Calculate days sales outstanding (DSO) by customer segment, not just company-wide. Retail customers might pay in 15 days, while enterprise clients take 60. Government contracts could stretch to 90 days or longer.

For AP, identify which vendors offer early payment discounts and which charge late fees. A 2/10 net 30 discount means paying in 10 days saves 2%, which yields a 36% annual return. Build these opportunities into your projection.

Track payment method preferences, too. Customers who pay by ACH typically pay faster than those who mail checks. Credit card payments arrive quickly but cost more in fees.

Update forecast drivers regularly

Business conditions change constantly, making regular updates essential. Set a weekly routine to refresh key assumptions and incorporate new information.

Monitor these variables most closely:

• Large customer payment status
• Sales pipeline and close probability
• Inventory levels and purchase requirements
• Payroll changes and hiring plans
• Credit line usage and availability
• Unusual or one-time expenses

When a major customer indicates payment delays, immediately adjust your projection. If sales trend above or below plan, update future collection estimates. These quick adjustments prevent surprises and maintain projection credibility.

Stress-test for seasonality and one-off events

Historical patterns tend to repeat, making seasonal adjustments critical for accuracy. Retail businesses see holiday spikes, tax preparers face April rushes, and construction slows in winter. Build these patterns into your base projection.

Identify your seasonal multipliers by comparing each month to your average. If December sales run 140% of average, apply that factor to your December projection. Remember that higher sales might mean earlier inventory purchases and increased staffing costs.

One-off events disrupt even careful projections. Common surprises include:

• Equipment breakdowns requiring immediate maintenance
• Customer bankruptcies or payment disputes
• Tax assessments or audit adjustments
• Legal settlements or insurance claims
• Facilities issues or moving costs

Maintain a contingency buffer for these events. A good rule of thumb is to keep reserves equal to your largest weekly cash outflow plus 20%. This cushion handles most surprises without breaking your business.

Automating cash projections with real-time data

Manual projections using spreadsheets require constant updates and run the risk of formula errors. Modern finance automation tools eliminate this burden while improving accuracy.

Sync card, bill pay, and bank feeds

Connecting your financial accounts creates an accurate foundation for projections. Bank feeds show actual cash balances and cleared transactions, while credit card feeds capture expenses as they happen, not weeks later when statements arrive.

Accounts payable software tracks upcoming obligations automatically. Instead of manually entering each vendor payment, the system knows what's due and when. This eliminates missed payments and surprise cash draws.

Automatic expense categorization saves hours of manual coding. Machine learning recognizes vendors and assigns appropriate categories, maintaining consistency across periods. You spend time analyzing cash flow rather than data entry.

Real-time synchronization also catches errors quickly. Duplicate payments, missed deposits, and unusual transactions appear immediately. This early detection prevents small issues from turning into a crisis.

Integrate your accounts for unified real-time data in Ramp

Ramp combines expense management, bill pay, and accounting integrations to help automate ongoing cash flow projections. The platform pulls live data from your connected accounts, eliminating manual updates and entry errors.

Your projection automatically reflects every corporate card transaction, approved bill payment, and processed reimbursement. Accounting system integrations can pullin AR and revenue forecasts, giving you comprehensive data projections that update themselves.

Automated alerts notify you to upcoming bill payments or suspiciously large expenses. Instead of checking spreadsheets daily, you receive proactive warnings about potential issues.

Ready to learn more about how Ramp can help improve your cash flow projects? Try an interactive demo and see for yourself why more than 45,000 businesses have saved over $10 billion and 27.5 million hours with Ramp.