Profitable companies fail all the time, and the cause is rarely losses. It is cash running out at the wrong moment. The sale is made and the invoice is sent, but payment is due in three weeks while the supplier must be paid this week. A cash flow forecast makes that gap visible before it hurts.
This guide covers what a cash flow statement is, how to build a forecast step by step, where spreadsheets break down, and how WAGONN Thalamus (ERP/Fi) can automate the projection.
What Is a Cash Flow Statement?
A cash flow statement shows the money actually entering and leaving the business in a period. An income statement shows invoiced revenue and expense; cash flow shows what was really collected and paid.
It has two main uses:
- Historical: where cash came from and went during a period.
- Forward-looking (forecast): expected inflows and outflows over the coming weeks and months, so a shortfall can be spotted early. This is where management value lies.
Classically cash flow is grouped into three headings:
| Heading | Examples |
|---|---|
| Operating | Customer receipts, supplier payments, payroll, taxes, rent |
| Investing | Equipment purchases, asset sales |
| Financing | Loan drawdowns and repayments, equity, dividends |
How to Build a Cash Flow Forecast: 6 Steps
- Set the opening balance. Current cash and bank balances, by currency.
- List expected inflows. Receipts from open sales invoices by due date, adjusted for how late each customer typically pays.
- List expected outflows. Open purchase invoices, payroll, taxes, rent, loan instalments.
- Split into periods. Weekly for the short term, monthly for the medium term.
- Calculate closing balances. Opening + inflows − outflows; each closing balance opens the next period.
- Run scenarios. What if a major customer pays two weeks late?
Five Weak Points of Spreadsheet Forecasts
- Stale data. Invoices and receipts are keyed in the ERP and copied to Excel by hand.
- Manual due-date tracking. Changed terms and part payments arrive late.
- Currency confusion. Mixed currencies produce rate and calculation errors.
- Key-person risk. The author of the formulas leaves and nobody owns the file.
- Conflicting numbers. Finance, sales and management bring different files to the meeting.
What Automation Needs
A reliable forecast depends on three sets of data that should live in the same system:
- Partner balances and invoices with due dates.
- Cash and bank accounts, by currency.
- Scheduled payments and expected receipts.
Cash Flow Management with WAGONN Thalamus
Thalamus already holds all of this data, so no separate model is needed:
- Partner accounts and aging: customer and supplier balances, receivables/payables aging and risk limits.
- Cash and bank accounts: tracked by currency, with bank integration to bring in account movements.
- Cash flow projection: expected inflows and outflows from approaching due dates, shown for "This Week", "Next Week" and "This Month".
- AR/AP position: total receivables against payables, with net position tracked live.
- Incoming payment allocation: customer payments are applied to the oldest open invoices first (FIFO), so receivable balances reflect reality.
- Live dashboard: reports live in a web dashboard, not a static file.
To speed up collection from dealers, the Plexus B2B portal lets dealers see statements and open invoices, pay online, and have the payment posted straight into Thalamus.
Five Practical Tips
- Fix payment terms at invoicing. No due date means unpredictable cash.
- Review aging weekly. Act early on balances older than 60 days.
- Make paying easy. Offer online payment options.
- Pay on the due date, not early. Use supplier terms without risking penalties.
- Keep a rolling forecast. Update weekly and hold a 13-week view.
Next Step
Good cash management needs process design as much as software. Our Data Management and Business Intelligence service can help review your finance flows, or you can contact us to see Thalamus with your data. See also our ERP solution.
FAQ
What is the difference between a cash flow statement and an income statement? The income statement shows invoiced income and expense; the cash flow statement shows money actually received and paid. A company can be profitable and still run out of cash.
How often should a forecast be updated? Weekly for 4 to 13 weeks ahead, monthly beyond that. If data flows automatically, updates cost nothing.
Is Excel enough? At low volume, yes. As invoices, banks and currencies grow, manual transfer causes errors and delay; producing it from ERP data is more reliable.
Direct versus indirect method? The direct method lists receipts and payments; the indirect method starts from net profit and adjusts for non-cash items. For management forecasting, direct is more practical.
