Examples of techniques for cash flow forecasts

Cash flow forecasting is one of the most critical functions in financial management. It allows businesses to predict liquidity issues and help to avoid serious problems which can hamper a business's long term survival.

Cash flow forecasting itself is divided into two main branches.

Direct and Indirect methods of cash flow forecasting themselves can be subdivided into other categories but for now we will look at the direct R&D method.

The R&D method is based around the correct allocation of all cash settlements into Receipts (R) and Disbursements (D).

A receipt is categorised as anything that brings cash into the company. This can be accounts receivable sales receipts, sales of assets or perhaps even financing such as loans or equity sales. These all result in a positive cash injection into the company.

The Disbursements are any transaction that removes cash from the company. Wages, repayment of loans, refunds or accounts payable are all examples of the kind of day to day costs that remove cash from the company.

Microsoft has templates for examples of cash flow forecasts for users of it's Office Software. Find them below at the following link.


This template will help to identify and automate the cash flow process and ensure businesses avoid fatal liquidity issues.

The Direct R&D method of course can make way for the Indirect methods such as ANI, PBS and the ARM methods. These are also examples of other cash flow forecasts.

The ANI method takes into account the Adjusted Net Income.

The PBS looks at the Pro-Forma Balance Sheet, assuming that once all cash settlements have been correctly calculated and accounted for the other balance sheets will be correct.

The ARM or accrual reversal method is more complex system that makes use of statistical analysis of accruals and cash transactions to give a long term cash flow forecast.

We recommend the R&D method for all small business's as it is the most straight forward and "Direct" methods.


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