A cash flow forecast is a table that estimates the cash a business will receive and pay each month, and the cash balance it will have at the end of each month. In questions you are asked to complete missing figures, find a closing balance or comment on a month where the balance is negative.
This lesson is the starting point of cash flow and finance. The same table is used again when you tell profit from a cash shortage and when you explain a delayed receipt.
What does each row mean?
Every forecast has the same skeleton, even when the case adds extra lines.
| Row | Meaning |
|---|---|
| Cash in (receipts) | Money actually received that month, such as cash sales and credit customers who pay |
| Cash out (payments) | Money actually paid that month, such as stock, wages, rent and equipment |
| Net cash flow | Cash in minus cash out |
| Opening balance | Cash at the start of the month |
| Closing balance | Opening balance plus net cash flow |
The key rule is that this month’s closing balance is next month’s opening balance. That one link is what makes the table a forecast and not three separate sums.
How do you build it, step by step?
- List every cash receipt for the month. Include a credit sale only in the month the customer is expected to pay.
- List every cash payment, including a one-off item such as new equipment.
- Total each side and find net cash flow: in minus out.
- Add net cash flow to the opening balance to get the closing balance.
- Copy the closing balance down as the next month’s opening balance, then repeat.
Worked example
Kedai Kek Mawar in Alor Setar opens January with RM3,000. The owner expects these figures.
| January | February | March | |
|---|---|---|---|
| Sales receipts | 9,000 | 8,500 | 10,200 |
| Ingredients | 4,200 | 4,000 | 4,600 |
| Wages | 2,500 | 2,500 | 2,500 |
| Rent | 1,200 | 1,200 | 1,200 |
| Utilities | 300 | 300 | 300 |
| New oven | 0 | 3,600 | 0 |
Step 1, total payments.
January: 4,200 + 2,500 + 1,200 + 300 = RM8,200.
February: 4,000 + 2,500 + 1,200 + 300 + 3,600 = RM11,600.
March: 4,600 + 2,500 + 1,200 + 300 = RM8,600.
Step 2, net cash flow.
January: 9,000 − 8,200 = +RM800.
February: 8,500 − 11,600 = −RM3,100.
March: 10,200 − 8,600 = +RM1,600.
Step 3, balances, carried forward.
January: opening 3,000, closing 3,000 + 800 = RM3,800.
February: opening 3,800, closing 3,800 − 3,100 = RM700.
March: opening 700, closing 700 + 1,600 = RM2,300.
Step 4, comment. The shop stays positive, but February closes at only RM700 because the oven costs RM3,600. The owner should check whether RM700 can cover a surprise bill before buying the oven that month.
The mistake to watch for
A common slip is to start every month from zero, or to write the net cash flow in the closing balance row.
Mistaken answer: “February closing balance: −RM3,100.”
The student wrote the net cash flow and forgot to add the opening balance of RM3,800. The true closing balance is RM700, still positive.
The correction is to write the opening balance first, every time, and fill the closing balance by adding the net cash flow to it. A forecast that says “negative” when the shop is still positive could lead to a wrong recommendation, such as borrowing money it does not need.
Check yourself
Try these on paper, then open each answer.
1. A stall opens a month with RM2,000, receives RM7,500 and pays RM8,300. Find the closing balance.
Show answer
Net cash flow: 7,500 − 8,300 = −RM800. Closing balance: 2,000 − 800 = RM1,200.
2. The next month the same stall receives RM6,000 and pays RM7,900. Find the closing balance and say what it means.
Show answer
Opening balance is RM1,200. Net cash flow: 6,000 − 7,900 = −RM1,900. Closing balance: 1,200 − 1,900 = −RM700. The stall cannot pay all its bills from its own cash, so it needs a short-term source of money for RM700 or a way to delay a payment.
3. A tailor sells a wedding outfit for RM2,400 in March, but the customer will pay in May. In which month does it appear in the cash forecast, and why?
Show answer
It appears in May, because a cash forecast records money when it is received, not when the sale is made.
Where this leads next
Once the table feels routine, move on to telling profitable trading from a cash shortage, then test the whole topic with the cash flow and finance practice set. The cash versus profit bridge shows the same movements on a timeline, and the ratios tool can check a subtraction or a percentage.
Some students can complete a table but freeze when the question says “comment on the forecast”. That is the kind of pattern our teachers look for in online one-to-one Business tuition.