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A cash flow forecast is a document that helps estimate the amount of money thatll move in and out of your business. It also includes your projected income and expenses. Cash flow forecasts typically cover the next 12 months, but can also be used for shorter periods of time like a week or a month.
A three-way forecast, also known as the 3 financial statements is a financial model combining three key reports into one consolidated forecast. It links your Profit Loss (income statement), balance sheet and cashflow projections together so you can forecast your future cash position and financial health.
It allows them to identify cash balance red flags like a negative balance and react before its too late. It also allows you to forecast short-term financing needs and plan when you need further investment. With an accurate overview of your inflows and outflows, you can take remedial action on problem areas.
A projected 3-year cash flow is a financial statement that outlines the anticipated cash inflows and outflows for a business over a specific three-year timeframe. It takes into account factors such as sales revenue, expenses, investments, loan repayments, and other sources.
Cash flow forecasting involves estimating your future sales and expenses. A cash flow forecast is a vital tool for your business because it will tell you if youll have enough cash to run the business or expand it.
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How to forecast your cash flow Forecast your income or sales. First, decide on a period that you want to forecast. Estimate cash inflows. Estimate cash outflows and expenses. Compile the estimates into your cash flow forecast. Review your estimated cash flows against the actual.
A 12-month cash flow forecast shows a company its expected liquidity situation, i.e. how high its income and expenses will be in the next 12 months. This corresponds to long-term liquidity planning and is an important planning tool for start-ups as well as for companies already firmly established in the market.
The process for preparing direct cash flow forecasts is relatively simple. You can use a spreadsheet or accounting software to help you record your transactions and the due dates. Then, you add all the inflows and outflows to get your total cash balance for that period.

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