Cash flow forecasting for small business: see the gaps before they hit

Most small-business cash crunches are visible weeks in advance — if you’re looking. A big BAS lands the same month as a slow trading period. A customer’s 60-day terms collide with a supplier’s 14-day terms. A new hire starts before the work they unlock is paid for. A cash flow forecast is simply a way of looking ahead so those collisions become decisions you make calmly, not emergencies.

Cash flow vs profit: why the distinction matters

A business can be profitable on paper and still run out of cash, because profit records a sale when it’s made and cash records it when it’s paid. Business.gov.au describes a cash flow statement as tracking money flowing in and out of the business, helping you identify payment cycles, forecast finances and prevent shortages. That’s the point: timing.

How to build a simple 12-month forecast

Use a spreadsheet or the free business.gov.au template. Set up 12 monthly columns.

1. Opening balance. What’s in the business bank account at the start of month one.

2. Cash in. Expected receipts, in the month you’ll actually receive them:

• Sales paid on the spot
• Invoices paid by customers (after their terms)
• Other income — grants, asset sales, owner contributions
• Loan funds, if you’re testing a borrowing scenario

3. Cash out. Every payment, in the month it leaves your account:

• Suppliers and stock
• Rent and outgoings
• Wages
• Super — from 1 July 2026, Payday Super means it’s paid with each pay run, received by the fund within seven business days after payday
• BAS — quarterly due 28 October, 28 February, 28 April and 28 July, or the 21st of the following month for monthly lodgers
• PAYG instalments, insurance, subscriptions, loan repayments
• Equipment and other one-off purchases

4. Closing balance. Opening + cash in − cash out. This becomes next month’s opening balance.

Any month with a low or negative closing balance is a gap to plan for.

A simple example layout (illustrative)

	Jul	Aug	Sep	Oct
Opening balance	18,000	14,500	9,800	12,600
Cash in	42,000	39,000	47,000	51,000
Cash out (excl. BAS)	45,500	43,700	44,200	46,000
BAS	—	—	—	9,400
Closing balance	14,500	9,800	12,600	8,200

Here, October is the pinch point: the quarterly BAS lands in a month where the balance is already lower. Seeing it in July gives three months to plan.

Testing a loan before you take it

A forecast is the best way to check whether a loan’s repayments fit. Add the loan funds in the month they’d arrive, add the purchase or costs they fund, and add repayments from the first due date. If the closing balance stays comfortable — including in your quiet months — the loan is likely sustainable. If it dips too low, consider a different amount, term or structure.

Working out how much to borrow and over what term? Talk it through with a specialist — enquiring involves no credit check.

Making your forecast realistic

• Use conservative sales assumptions, especially for new ventures.
• Use actual payment patterns, not your invoice terms. If customers on 30-day terms really pay in 45, forecast 45.
• Include everything, including small subscriptions and annual bills.
• Build in a buffer for the unexpected.
• Separate GST. The GST you collect isn’t yours — it goes out with your BAS.

Keep it alive

Business.gov.au recommends updating cash flow statements regularly to identify seasonal trends and comparing estimated with actual income and costs to spot shortfalls early. Once a month:

1. Enter the actual figures for the month just finished.
2. Note where reality differed from the forecast and why.
3. Adjust the remaining months.
4. Add a new month at the end, so you always see 12 months ahead.

What a forecast tells a lender

For a new business, growth project or larger loan, a forecast shows a lender you understand your numbers. They’ll look for realistic assumptions, all costs included, and a clear picture of how repayments are covered. It also helps you explain seasonal dips so they aren’t misread. See seasonal business finance and growth finance.

Illustrative example: A small printing business forecasts a quiet January, a large equipment repayment starting in February and its quarterly BAS on 28 February. Seeing all three together in October, the owner sets up a small line of credit for the January–February dip rather than scrambling in late February.

Common forecasting mistakes

• Forgetting the BAS or treating collected GST as income — see paying an ATO debt or BAS bill if it’s already happened
• Forecasting sales at invoice date rather than payment date
• Leaving out owner drawings
• Ignoring annual costs such as insurance renewals and registrations
• Never updating it after the first month

Use your forecast to choose the right finance

Once your forecast shows where the gaps fall, choosing finance gets easier: short gaps suit a line of credit or cash flow loan, long investments suit term loans or equipment finance. Bring your forecast — or just the gist — and a real person will match a facility to it. There’s no credit check when you enquire, your details aren’t handed around to a bunch of lenders, and realistic numbers help us find the right option first time. Get help funding the gaps.