Small Business Cash Flow Basics: Forecasting the Next 90 Days

A business can show a profit on paper and still struggle to pay its bills. The reason is timing. Cash flow tracks when money actually enters and leaves your accounts, while profit measures revenue and expenses over a period. Customers may pay weeks after an invoice while rent, payroll and suppliers must be paid on schedule. A simple forecast helps you see problems before they arrive.

Why a 90-Day Window

Ninety days is long enough to spot upcoming shortfalls and short enough to be reasonably accurate. Many owners review it weekly and update it as actual numbers come in.

Step 1: Start With Your Opening Balance

Record how much cash you currently hold across business accounts. This is the starting point for each week or month in your forecast.

Step 2: Estimate Cash Coming In

• Sales received at the time of purchase.
• Invoices you expect to be paid, based on when customers actually pay, not on due dates.
• Other income such as loans, grants or interest.

Be conservative. If customers typically pay in 45 days, plan on that rather than the 30 days stated on your invoice.

Step 3: List Cash Going Out

• Payroll and contractor payments.
• Rent, utilities and insurance.
• Inventory and supplies.
• Loan payments, taxes and software subscriptions.
• Irregular costs such as annual license fees and equipment repairs.

Step 4: Calculate the Net and Running Balance

For each period, subtract outflows from inflows and add the result to the opening balance. The result is your closing balance, which becomes the next period's opening balance. Look for any periods where the balance falls close to or below zero.

Ways to Improve Cash Flow

• Invoice promptly and follow up on late payments.
• Offer deposits or early-payment discounts where appropriate.
• Negotiate longer payment terms with suppliers.
• Avoid tying up too much cash in slow-moving inventory.
• Build a reserve, even a small one, for unexpected costs.
• Arrange a line of credit before you urgently need one.

Plan for Scenarios

Create a best case, expected case and worst case. If your biggest customer pays late or sales fall by twenty percent, would you still cover your costs? Knowing the answer helps you decide how much cushion you need.

Finally, review your forecast against actual results at the end of each month. The gaps between your estimates and reality reveal which assumptions, such as customer payment timing or seasonal sales, need adjusting, and over time your forecasts become a much more reliable decision-making tool.

This article is general information and not financial advice. Consider consulting an accountant about your situation.