Monthly cash flow forecast example, filled in line by line

This monthly cash flow forecast example walks through six months for an illustrative services company, line by line, from opening cash to the minimum cash check. Each month starts with the bank balance, adds the money expected to arrive, subtracts the money expected to leave, and ends with a balance that rolls into the next month.

Decipher's guide to cash flow forecasting covers methods, horizons and how to build a forecast step by step, with a short example. This post goes deeper on one forecast: every line filled in, the assumption behind it, and what changes when collections slow down.

The company and the assumptions

The business is a fictional professional services firm with about 40 people, billing clients monthly in arrears. It has a small term loan and an internal rule that cash should never fall below $400K, a little under one month of payroll and rent. The forecast uses the direct method, which lists major classes of cash receipts and cash payments rather than starting from profit, so every line can be checked against the bank statement.

The key assumptions:

• Billings: $640K and $600K in the two months before the forecast starts, then $680K, $660K, $700K, $720K, $700K and $740K.
• Collection pattern: 60% of each month's invoices are collected the following month and 35% the month after. The last 5% arrives late or not at all, so the forecast leaves it out.
• Hiring: two hires start in month 4.
• Capex: a $120K equipment and fit-out purchase in month 4, with an $80K equipment loan already signed to fund part of it.
• Taxes: estimated income tax paid in months 3 and 6.

The six month cash flow forecast

Illustrative figures, not client data.

Line by line

Opening cash

Month 1 opening cash is the actual balance across all operating bank accounts on the start date, not the cash figure from books that may be weeks behind. After month 1, opening cash is simply the prior month's ending cash. If the first number does not tie to the bank, nothing below it can be trusted, and lenders and investors check it first.

Collections by timing

This is the most important section. Revenue is not cash, so the forecast never uses billings directly. Instead, each month's invoices are spread over the months they are actually paid. Month 1 collections are 60% of the prior month's $600K ($360K) plus 35% of the $640K billed two months earlier ($224K). The pattern should come from how customers really pay, taken from the receivables aging, not from the payment terms on the invoice. In practice, building collections from actual payment behavior is the change that most improves forecast accuracy. Very large customers deserve their own line with their own pattern.

Other receipts

Anything that is not customer payments sits on a separate line: a deposit refund, a tax refund, proceeds from selling equipment. Here a $15K lease deposit comes back in month 2. Keeping these separate stops one-off cash from flattering the collections trend.

Payroll, rent and vendors

Payroll and benefits is the largest outflow, driven by the headcount plan and paid on actual pay dates. It steps up by $25K in month 4 when the two hires start. Rent is fixed. Vendors and contractors follow payment terms on open bills, then recurring spend, with annual renewals placed in the month they are paid.

Taxes

Estimated income tax is paid in four periods during the year, each with its own due date, so it lands as a lumpy $40K outflow in months 3 and 6 instead of being spread evenly. Sales tax remittances and payroll tax deposits, where they apply, belong in the months they are paid. The company's CPA should confirm amounts and dates.

Debt service

The $20K a month covers interest and principal on the term loan. If an interest-only period ends during the forecast, the step up belongs in the month it starts.

Capex and financing

The $120K equipment purchase hits in month 4. The $80K equipment loan appears in the same month because it is already signed. A loan in negotiation or a raise in conversation does not appear at all; financing enters the forecast only once it is committed.

Ending cash and the minimum cash check

Net cash flow is total receipts minus total payments plus financing; ending cash is opening cash plus net cash flow. The last row compares ending cash with the $400K minimum. In the base case the tightest month is month 1, with $309K of headroom, and cash builds to $896K by month 6. Month 4 is worth a closer look: without the signed loan, ending cash would have been $717K, still safe, but the purchase is the largest single outflow in the forecast.

The downside variant

The base case looks comfortable. The downside tests it with one plausible change: from month 2, collections run 15% below plan, perhaps because a large client starts paying late and a project invoice is disputed. Costs stay as planned, including the month 4 hires and equipment.

Illustrative figures, not client data.

A modest shortfall changes the picture. Instead of building, cash falls every month from month 2, and headroom over the $400K minimum shrinks from $309K to $7K by month 6, one bad month away from a breach. The decisions follow from the table: chase the slow client now, consider pushing the month 4 hires back, and arrange a credit line while the base case still looks healthy to a lender.

Monthly and weekly views together

This monthly layout suits runway, hiring and borrowing decisions over 12 to 18 months. It cannot show whether payroll in week 2 clears before a large payment arrives in week 3. That is the job of the weekly 13-week cash flow forecast, which uses the same lines at invoice and pay-date level. Decipher's free 13-week cash flow forecast template covers that weekly view, with receipts, disbursements, minimum cash and actual vs forecast columns. The two should agree: the weekly forecast for the next quarter should roll up to the first three months of the monthly one.