Glossary

Cash Forecasting

Cash forecasting projects the cash a business will receive and pay out over a future period, often as a 13-week rolling view. Finance teams use it to see shortfalls early and decide on timing for payments and borrowing.

  • Financial Reporting

Cash forecasting is the practice of projecting the cash a business will collect and spend over a coming period. The most common format is the 13-week cash flow forecast, a weekly grid that shows opening cash, expected receipts, expected payments, and closing cash for each of the next 13 weeks.

Why 13 weeks

Thirteen weeks is one quarter. It is long enough to see a payroll or tax crunch coming and short enough that the inputs stay reliable. Lenders ask for it, and treasury teams in a tight quarter often refresh it weekly.

What goes into the forecast

  • Opening cash. The reconciled bank balance. A forecast built on an unreconciled balance starts wrong. See bank reconciliation.
  • Receipts. Expected customer payments by week, drawn from the open invoice list and AR aging. Your DSO tells you how long collections take in practice.
  • Disbursements. Payroll, vendor payments due, rent, taxes, debt service and planned capital spending.
  • Closing cash. Opening cash plus receipts minus disbursements, carried into next week as the new opening balance.

Direct and indirect methods

The direct method forecasts actual cash in and out by week. It suits the near term. The indirect method starts from projected net income and adjusts for working capital changes, which suits longer horizons and ties to the forecast in FP&A. Most teams use direct for 13 weeks and indirect beyond.

Where forecasts go wrong

Three errors recur. Receipts assume customers pay on terms when history shows they pay late. A large disbursement sits in someone's head instead of the grid. Or the forecast is built once and never compared to actuals, so the error never shrinks. Review the variance between forecast and actual cash each week and adjust the assumptions that missed.

How automation helps

Most of the work is data gathering: pulling balances, listing open invoices and bills, and updating the grid. Adopt's agents prepare those inputs from the connected bank and ledger, and the finance team reviews the assumptions that carry judgment. Nothing posts without sign-off. Sign up free.