Cash flow projections show you when money is coming in and going out over a future period. Unlike a profit and loss statement that tells you if you’re profitable, a cash flow projection tells you if you’ll actually have money in the bank when bills are due. Plenty of profitable businesses run out of cash because they didn’t see a timing gap coming.

The basic structure is straightforward. Start with your opening cash balance. Add all expected inflows like customer payments, loan proceeds, or investment. Subtract all expected outflows like payroll, rent, vendor payments, and taxes. What’s left is your ending cash balance, which becomes the opening balance for the next period.

First, gather your historical data. Look at the last 6 to 12 months of bank statements and your accounting records. You need to understand your actual patterns, not what you hope will happen. When do customers typically pay? How do expenses fluctuate month to month?

Second, list all your cash inflows. For most small businesses, this is primarily customer collections. If you invoice customers, don’t put the revenue in the month you earned it. Put it when you expect to actually receive payment. A job billed in March that gets paid in April is April cash, not March cash. This timing distinction is where most projections go wrong.

Third, list all your cash outflows by category. Payroll is usually the biggest. Then rent, loan payments, vendor bills, insurance, subscriptions, and taxes. Include everything that pulls money from your account. Don’t forget quarterly estimated taxes if you’re making payments to the IRS or Utah state.

Fourth, account for irregular expenses. Annual insurance premiums, quarterly tax payments, equipment purchases, and loan principal payments hit harder because they’re large and infrequent. Missing one of these in your projection can create a surprise shortfall.

Fifth, project forward weekly or monthly depending on your situation. If cash is tight, a 13-week rolling weekly projection gives you visibility on immediate danger. If you’re planning for growth or a capital raise, a 12-month monthly projection works better.

Update your projection regularly. Once a month at minimum, weekly if cash is tight. Compare what you projected to what actually happened. The gap between the two teaches you where your assumptions are off. Maybe customers are paying slower than expected, or a vendor you thought billed net-30 actually bills net-15.

The foundation of any good projection is accurate books. If your historical data is messy, your projections will be too. A full charge bookkeeping service keeps your records clean so you’re projecting from reality, not guesswork.

If you’re raising capital or negotiating with lenders, your cash flow projection becomes a critical document. Investors and banks want to see that you understand your cash needs and have a plan. For growing businesses that need more sophisticated forecasting tied to fundraising and strategic planning, fractional CFO support can build projections that hold up under investor scrutiny.

The goal isn’t a perfect prediction. It’s early warning. A cash flow projection done reasonably well and updated consistently shows you trouble 30 to 60 days before it hits. That’s usually enough time to do something about it.