What a bookkeeper needs before building a cash flow projection

A cash flow projection is only as good as the ledger underneath it. Before you build one, spend an hour confirming the inputs. A projection built on a half-entered month does not mislead gently; it misleads with confidence.

Start from a closed and reconciled ledger

Every bill, payment, deposit and transfer for the period just ended must be posted before the projection begins. If the last two weeks of card spend are still in a shoebox, the opening cash figure is wrong and every week that follows inherits the error.

Reconcile the bank and credit card accounts first. An unreconciled account means you cannot prove the opening balance, and the projection's first line is the one line you can state as fact. Keep that fact true.

List the recurring outflows you already know

Most of a short-horizon projection is not forecasting at all. It is scheduling. Pull together the payments that repeat on known terms:

• Payroll and its associated remittances
• Rent, leases and loan instalments
• Insurance and subscription renewals
• Recurring supplier payments and standing orders

If your accounting software holds memorised or recurring transactions, review that list for amounts and frequency. It is a good starting inventory, but do not trust it blindly. Amounts drift, cards expire and contracts end. Confirm each one against the source document or bank history before it goes into the projection.

Separate the known from the guessed

Split the projection into two columns or zones: committed items and estimated items. Committed items are invoices raised, bills entered, payroll scheduled. Estimated items are the sales you expect and the variable costs that follow them.

This split is what makes the projection useful in a review meeting. When actuals diverge from plan, you want to know immediately whether the miss was in a committed item, which points at a posting or timing problem, or an estimate, which points at the forecast itself.

Document the adjustments you intend to make

You will usually need to adjust the starting point: a deposit in transit, an unpresented cheque, a bill entered twice and later reversed, or a payment dated into the wrong period. Write each adjustment down, with its reason, before it goes in.

Undocumented adjustments are the fastest way to lose the reader's trust. A working paper that says "opening cash adjusted for a $4,200 unpresented cheque, per bank rec" survives scrutiny. A bare adjusted number does not.

Agree the horizon and the review rhythm

Decide the horizon before you build: 13 weeks is the common choice for liquidity work, monthly for a year is usual for planning. Longer horizons are not more informative; they are more speculative.

Then agree when the projection gets refreshed. A weekly update against actuals takes minutes when the ledger is current. A quarterly refresh of a weekly projection is not a projection any more, it is a historical document.

Keep the projection honest about what it is not

A projection is a working paper, not a report of record. It belongs with the month-end pack, updated and archived each cycle, so you can show what you expected and what actually happened. That comparison, over a few cycles, is where the real value sits: it tells you which estimates to trust and which to keep challenging.