Question 1

How do I forecast cash flow for a small business?

Accepted Answer

Start with cash on hand, add what you will actually collect each month (not what you bill), subtract every outflow including loan payments, owner draws, and a tax set-aside, and carry the balance forward twelve months. The two numbers that matter are the ending cash and the lowest point of the line.

Question 2

Why am I profitable but always short on cash?

Accepted Answer

Usually timing: you book revenue when you invoice but collect 30 to 60 days later, while payroll and rent leave on schedule. Growth makes it worse because you fund more receivables and inventory every month. A collection lag of one month on a growing business is a permanent cash drain.

Question 3

How much cash reserve should a business keep?

Accepted Answer

Enough that your stressed low point stays positive. Run the forecast with revenue down 15 percent; if the line goes negative, that deficit is the reserve or credit line you need. For most operators it lands between one and three months of outflow.

Question 4

When should I get a line of credit?

Accepted Answer

Before you need it. Banks underwrite on your last two years of statements and current position, so the best time to apply is when the forecast shows you will not need it for six months. Applying during a cash crisis is how you end up with expensive online debt.

12-Month Cash Flow Forecast

Starting Point & Revenue

Outflows

One-Time Items & Stress

The Year Ahead

Full Forecast & Stress Test Pro

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