Why Every Business Needs a Cash Flow Forecast

(Be sure to download the cashflow forecast template at the end of this post!)

You’ve probably heard the phrase “cash is king.”

But here’s the real truth: cash flow is everything. It’s what keeps your team paid, your vendors happy, and your business moving forward.

And yet, most founders are operating without a clear view of their cash runway. They’re checking the bank balance, skimming the P&L, and hoping for the best.

Hope is not a financial strategy.

If you want to build a business that lasts, you need more than gut instinct. You need a cash flow forecast.

📌Why You Need a Cash Flow Forecast

Let’s start with what a forecast actually does.

A cash flow forecast is a simple projection that shows how much money is expected to come in and go out over a future period—usually 12 weeks.

It’s not accounting. It’s not bookkeeping. It’s just seeing around corners.

Here’s why it matters:

1. It Gives You Time to React

If your cash is going to dip dangerously low 6 weeks from now, wouldn’t you want to know that today—while you still have time to shift gears? A forecast gives you early warning signs so you can course-correct before it’s a crisis.

2. It Helps You Sleep at Night

There’s a big difference between “I think we’re okay” and “I know we’re okay.” When you have a cash forecast, you’re not guessing whether you can make payroll. You know.

3. It Makes You a More Confident Leader

When investors, team members, or partners ask about your runway—you’ll have a real answer. Not a vague one. That credibility matters.

4. It Drives Better Decisions

Want to hire someone new? Upgrade your tech stack? Offer more flexible payment terms to clients? A forecast helps you make those decisions with clarity, not fear.

📌 What a Good Cash Forecast Looks Like

Here’s the good news: a cash flow forecast doesn’t need to be complicated.

At Rockbridge CFO, we recommend a rolling 12-week cash forecast. It’s simple, powerful, and designed for real-world use.

Here’s what it includes:

🔹 Starting Cash Balance

This is your actual bank balance at the start of the week—not what your P&L says, but what’s actually in the bank.

🔹 Cash In

Expected collections, customer payments, or other inflows by week. Not revenue you earned—just money you expect to hit your account.

🔹 Cash Out

All outflows—like payroll, rent, contractor payments, software subscriptions, loan payments, taxes, etc. This is where lump-sum or one-off expenses (like insurance or annual renewals) get flagged in advance.

🔹 Ending Cash Balance

What’s left at the end of each week, after inflows and outflows. This becomes the starting balance for the next week.

🔹 A Look-Ahead

By mapping 12 weeks at a time, you get a realistic picture of your “runway”— how long you can operate before needing more cash or adjusting plans.

🔁 Weekly Updates

The key to making this work? Update it every week. As one week ends, drop it off the front of the forecast and add a new one at the end. That way, you're always looking 12 weeks ahead, and staying proactive instead of reactive.

🧯Understanding Burn Rate (And Why It Matters)

Once you’ve built your forecast, the next step is figuring out burn rate. That’s how quickly your business is using up cash.

Think of it like this: if your business is a car, burn rate is how fast you’re going through fuel.

There are two simple ways to calculate it:

1. Average Net Burn

This is the most common method. It tells you how much cash you’re spending each week, on average.

• Just take your starting cash and subtract your ending cash over a period (usually 12 weeks).

• Then divide by the number of weeks where you actually had negative cash flow (weeks where you spent more than you brought in).

  
  

📌 Why skip the positive weeks?

Including weeks where cash goes up can make your burn rate look artificially low, especially if you had a big one-time payment come in.

2. First Negative Week

This is a fast way to check how long you can keep going before things get tight.

• Look at your weekly forecast and find the first week where your ending cash turns negative.

• That’s your warning sign and your runway is how many weeks you have until that moment.

Both methods are useful:

• Average burn rate gives you a steady-state view of how fast you're spending.

• First negative week helps you spot immediate cash crunches.

  
  

Ideally, you want at least 12 weeks of visibility, enough to react before you hit a wall.

🛣️ What Is Runway — and How Do You Calculate It?

Think of runway like the number of weeks your business can keep going before the cash runs out assuming nothing changes. It’s one of the most important numbers you can know.

There are two common ways to calculate it:

1. Using Average Burn Rate

This is a good method when your cash flow is fairly stable and predictable.

Take your current (beginning) cash balance and divide it by the average net burn you calculated from above.

Example: You have $120,000 in cash. You’re burning $10,000 per week (on average).

→ You have 12 weeks of runway.

Note: This doesn’t account for positive weeks, so it gives you a more conservative view.

2. Using Forecasted Cash Flow

This method looks ahead instead of backward.

• Use your 12-week cash forecast.

• Runway is the last week where your ending cash is still positive.

• If you go negative in week 9, then you have 8 weeks of runway.

This approach is dynamic and updates automatically as your forecast changes. It’s especially helpful for early-stage or seasonal businesses where cash flow is more unpredictable.

Final Thought

If you’re running a business, don’t rely on the bank balance alone. That tells you where you are, not where you’re headed.

A cash flow forecast gives you visibility, confidence, and control. And that’s the difference between hoping you’ll make it and knowing you will.

⚙️ Bonus: Want the Forecast Template We Use?

We’ve put together a free download of our 12-week cash forecast model, the same one we use with our clients.

Click below to download the template.

Rockbridge CFO Cashflow Forecast Model.xlsx

Download XLSX • 21KB

It’s Excel-based, easy to use, and includes built-in formulas and tips so you can stay in control of your cash, even if you’re not a numbers person.

Just a quick heads-up:

This model and post are meant to be helpful tools, not formal financial advice. Every business is different, so if you're making big decisions, it’s always smart to check in with your CFO or accountant.