How to Build a Simple 12-Month Cashflow Forecast (and Why It Is Important)

A strong business isn’t built on guesswork—it’s built on planning. One of the most valuable financial tools a business owner can create is a 12-month cashflow forecast. It doesn’t have to be complex or require sophisticated software. Even a basic spreadsheet can give you powerful insights into how money moves through your business.

In this guide, we explain what a cashflow forecast is, how to build a simple 12-month version, and why every business—large or small—should have one.

What Is a Cashflow Forecast?

A cashflow forecast predicts how much money will flow into and out of your business over a specific period. It helps you see:

• When cash will be tight

• When cash will be strong

• Whether you can cover upcoming expenses

• What months may require careful planning

• Whether growth decisions are financially safe

A 12-month cashflow forecast gives you a full year of visibility, allowing you to plan ahead with confidence.

Why a 12-Month Cashflow Forecast Is Important

A cashflow forecast is one of the best early-warning systems a business can have. It allows you to:

1. Avoid unexpected cash shortages

By seeing your future cash position, you can prepare for slow months, seasonal dips, or large expenses.

2. Make confident business decisions

Hiring staff, buying equipment, or expanding becomes less risky when you know you’ll have the cash to support the decision.

3. Reduce stress and financial uncertainty

Forecasting helps you stay in control and ahead of your numbers—no more month-to-month surprises.

4. Plan for tax, superannuation, and BAS

You can set aside money well in advance and avoid last-minute scrambling.

5. Help your business grow sustainably

A forecast highlights when you’ll have surplus cash that can be reinvested strategically.

Simply put: forecasting turns financial chaos into clarity.

How to Build a Simple 12-Month Cashflow Forecast

You don’t need fancy software. A simple spreadsheet with 12 columns (one for each month) and a list of inflows and outflows is enough. Here’s how to build one step-by-step.

Step 1: Start With Your Opening Bank Balance

Begin your forecast with the cash you currently have in the bank.
This becomes your starting point for Month 1.

Example:
Opening balance: $12,000

Step 2: Estimate Your Monthly Cash Inflows

Cash inflows may include:

• Sales revenue

• Retainer or recurring income

• Grants or funding

• Loan injections

• Tax refunds

• Other income streams

For each month, estimate how much cash you expect to receive—not how much you invoice, but how much you’ll actually collect.

Tip: Look at the last 12 months of bank statements for guidance.

Step 3: List All Monthly Cash Outflows

Outflows include any cash leaving your business, such as:

• Rent or office costs

• Wages or contractor payments

• Supplier invoices

• Subscriptions and software

• Marketing expenses

• Loan repayments

• Superannuation

• GST and tax obligations

• Insurance

• Inventory purchases

• Utilities

Enter the estimated amounts for each month. Be realistic—and include annual or quarterly expenses in the months they’re due.

Step 4: Calculate Net Cashflow (Inflow – Outflow)

For each month:

Net Cashflow = Total Inflows – Total Outflows

• If the result is positive, cash is increasing

• If negative, cash is decreasing

This tells you whether each month will move you forward or backward financially.

Step 5: Add Net Cashflow to the Opening Balance

This gives you your closing cash balance for the month—which then becomes the opening balance for the next month.

This rolling effect is what creates a full 12-month forecast.

Step 6: Update Regularly (Monthly or Fortnightly)

A forecast only works when it’s kept up to date. Review it regularly by:

• Updating actual numbers

• Adjusting future months

• Re-estimating sales or expenses

• Adding upcoming obligations

Your forecast should evolve with your business.

What Your Completed 12-Month Cashflow Forecast Should Show

By the end, you should be able to clearly see:

• Months when cash will be tight

• Periods of surplus cash

• Whether you can afford future commitments

• When to cut back on spending

• When you can safely invest in growth

• Whether you need funding or finance support

This visibility helps you make smart, proactive decisions.

Common Mistakes to Avoid

1. Overestimating future sales

Be conservative. Overly optimistic forecasts create false confidence.

2. Forgetting occasional expenses

Insurance, tax, and annual subscriptions often catch business owners off guard.

3. Forecasting by invoice instead of cash

Only include actual expected cash received.

4. Not updating the forecast regularly

A forecast becomes outdated quickly—update it monthly at minimum.

Simple Tools You Can Use

You can use:

• Excel or Google Sheets (most popular)

• Accounting software, like Xero’s short-term cashflow tool

• Forecasting apps, like Float, Fathom, or Spotlight

For most small businesses, a spreadsheet is more than enough.

Final Thoughts

A 12-month cashflow forecast is one of the most powerful financial tools a business can have—and one of the simplest to create. With just a spreadsheet and an hour of your time, you can gain clarity, reduce stress, and make better decisions for the future of your business.

Whether you're planning to expand, hire, or simply stay on top of your finances, a cashflow forecast gives you the forward visibility you need to stay in control.

If you’re unsure where to start, your accountant can help you build a custom forecast tailored to your business goals and financial situation.