Cash Flow Forecasting and Budgeting During the COVID-19 Pandemic

Cash-flow forecasting can be complicated, as it involves both concrete data from the past and present and guesswork anticipating the future. At its core, it is designed to determine whether or not you will have enough cash to continue operating and prevent funding issues. You can create a forecast using one of two methods:

• Direct: Direct forecasting is usually used for short-term cash flow (90 days or less) and includes estimated receipts from accounts receivable and accounts payable. Direct forecasting is often more reliable because it involves more concrete data.
• Indirect: Indirect forecasting is best suited for long-term planning (past 90 days) and involves projected income statements and balance sheets.

When you participate in cash-flow forecasting independently or with the guidance of Rubino and Company, you should create a sales forecast showing how much you expect to sell and a profit and loss forecast that combines your income with expenses. Once you have those two documents, you can complete cash-flow forecasting.

Use your sales forecast to determine how much cash you think will come in to your business, including things like PPP loans. Subtract the costs from your profit and loss forecast. Add up all the expenses you will have each month and subtract it from money entering your business to receive the net cash flow. Will your bank account balance be increasing over this period or decreasing? Will you have enough to cover expenses? Your financial consultant at Rubino & Company can help you find the answers to these questions.