How to build a cash flow forecast from the money you’ve already committed
On a Monday morning in November, the CFO asks a simple question. The supplier of a new packing line wants a Rp 900 million deposit on the 20th. Can we pay it? Finance opens the cash forecast. Built from October’s payments, it shows November ending with Rp 660 million in the bank, comfortably above the Rp 500 million the company likes to keep. The answer goes back before lunch: yes.
In the last week of the month, payroll goes out alongside a loan instalment and the first invoices for the year-end stock order, and the month ends with Rp 280 million in the bank. None of it was news. The stock order was signed in October, the invoices were sitting with approvers and payroll goes out on the 25th every month. The forecast just didn’t look at any of them.
A cash flow forecast built from what the business has already committed would have shown the gap three weeks earlier, while there was still time to act. This guide explains what a cash flow forecast is, where next month’s outflows can already be found, a worked example of four weeks, why forecasts go wrong and how to build one that stays up to date. It focuses on the money going out; customer receipts need their own forecast from sales and collections.
What is a cash flow forecast?
A cash flow forecast is an estimate of the cash coming into and going out of your bank accounts over the coming weeks or months, and the balance at the end of each period. It answers two questions a profit forecast can’t: when will we run short, and can we afford this payment on this date?
It’s easy to confuse with three things finance teams already have:
- The budget: the plan for the year, usually on an accrual basis, where a cost counts when it’s incurred, not when it’s paid. The budget can be on track in a month when cash runs short.
- The cash flow statement: part of the financial statements, showing where cash went in a past period. The forecast looks forward.
- The AP ageing report: what you owe suppliers today and how late it is. The forecast starts from it, then adds what you’ll owe by next month.
The direct method lists expected receipts and payments by date, and suits the next few weeks. The indirect method starts from forecast profit and adjusts for non-cash items and working capital, and suits a year or more. This guide uses the direct method in the common 13-week format: one quarter, week by week, rolled forward every week. Weekly matters, because a month can end comfortably with a week in the middle that doesn’t.
Where next month’s outflows already are
Most of what leaves the bank in the next few weeks already exists somewhere in the business, as a document or a schedule. From most to least certain:
- Approved invoices, by due date. Amount, vendor and date are all known, in your AP ledger.
- Payroll and statutory payments. Salaries, BPJS contributions and the month’s tax payments, on dates that barely move. They come from HR and the tax calendar, not from AP.
- Recurring contracts. Rent, leases, loan instalments, insurance, subscriptions and utilities. Keep a register with each amount and payment date.
- Invoices still in approval. The amount is known and most will be approved. This is the line spreadsheet forecasts miss most often, because these invoices sit in approvers’ inboxes, not in the ledger.
- Open purchase orders, by expected delivery. A signed purchase order (PO) is a commitment. Add the payment terms to the delivery date to find the week it will be paid. A PO policy makes this line more complete, because spend without a PO stays invisible until the invoice arrives.
- Employee spend. Reimbursements, cash advances and corporate card settlements. Single claims are hard to predict, but the weekly total is steady, so use the recent average.
- Everything else. One-off and urgent payments nobody can see yet. Keep a buffer based on history, and keep it small by sending urgent requests through the usual approval.
The first three are known: amount and date are fixed. The next two are likely: the amount is known, and the date depends on an approval or a delivery. The last two are estimated. Label each line, so readers know how much weight each number can bear.
A worked example: four weeks of November
It’s Monday 2 November. The company has Rp 2.4 billion in the bank, wants to keep at least Rp 500 million at all times, and the supplier wants its Rp 900 million deposit on Friday 20 November. Finance builds the outflows from the sources above, with each week starting on the date shown:
| Cash out (Rp million) | 2 Nov | 9 Nov | 16 Nov | 23 Nov |
|---|---|---|---|---|
| Approved invoices | 310 | 180 | 240 | 120 |
| Payroll, BPJS and tax | 0 | 210 | 0 | 780 |
| Rent, leases and loan | 85 | 0 | 0 | 150 |
| Invoices in approval | 0 | 95 | 160 | 210 |
| Open purchase orders | 0 | 0 | 120 | 260 |
| Employee spend | 25 | 25 | 25 | 25 |
| Machine deposit | 0 | 0 | 900 | 0 |
| Total | 420 | 510 | 1,445 | 1,545 |
Customer receipts come from the sales team’s collections forecast. Starting from Rp 2,400 million, the balance runs like this:
| Week starting (Rp million) | Cash in | Cash out | Closing |
|---|---|---|---|
| 2 Nov | 350 | 420 | 2,330 |
| 9 Nov | 600 | 510 | 2,420 |
| 16 Nov | 400 | 1,445 | 1,375 |
| 23 Nov | 450 | 1,545 | 280 |
What the forecast tells the CFO:
- The deposit itself is affordable. After paying it on the 20th, the company still has Rp 1,375 million at the end of that week.
- The problem is the week after. Payroll of Rp 780 million, a Rp 150 million loan instalment and Rp 260 million of invoices from the year-end stock order land together. The month ends at Rp 280 million, Rp 220 million below the floor.
- The old forecast was Rp 380 million out. It used October’s outflows of Rp 2,640 million, but November’s come to Rp 3,020 million before the deposit. The difference is the Rp 380 million of open purchase orders for year-end stock, which October never had.
Found on 2 November, the gap leaves three weeks to choose. Splitting the deposit, with Rp 450 million on 20 November and the rest in early December, keeps the month-end balance at Rp 730 million, if December’s forecast can take the second half. A later date agreed for one of the stock invoices would also work, as would a short drawing on the credit line. Found on the 25th, only the credit line is left.
Why cash flow forecasts go wrong
- Built from last month. A copy of last month’s actuals, perhaps plus a growth percentage, assumes nothing has changed. It can’t know about the order signed in October or the project starting next month.
- Invoices finance can’t see. An invoice in an approver’s inbox, on a site manager’s desk or in a vendor’s email thread isn’t in the ledger, so it isn’t in the forecast. Invoice processing that captures every invoice on arrival fixes this.
- Purchase orders left out. The cash was committed when the PO was signed. A forecast that starts from the invoice sees the spend weeks late.
- Due dates counted from the wrong day. Terms counted from when an invoice was entered, not when it arrived, put the payment in the wrong week.
- Paying by habit, not by due date. If invoices are paid when they’re approved or when the vendor calls, due dates predict nothing. A payment run on fixed days makes them reliable.
- Never checked against what happened. If nobody compares last week’s forecast with last week’s bank statement, the same line is wrong every week.
Cash flow forecasting in Indonesia
- THR and Lebaran. THR, the religious holiday allowance, adds up to about an extra month of salary, paid ahead of the holiday. For most companies the largest payment comes before Lebaran, which falls about 11 days earlier each year, so a forecast copied from last year can put it in the wrong month.
- Withholding tax splits one payment in two. When you withhold PPh 23 on a service invoice, the vendor receives the net amount in the payment run and the tax is paid to the state separately, on the monthly deadline. Forecast both, each on its own date.
- Tukar faktur. Where terms such as “TOP 30” are counted from the date on the tanda terima, use that date, not the invoice date, to work out when the payment falls.
- Imports in foreign currency. Forecast supplier invoices in the currency you’ll pay them in, then translate at a stated rate, so treasury knows how much foreign currency it needs and when.
- One forecast per PT. A healthy group total can hide one entity that can’t make payroll, so forecast each entity separately and agree intercompany recharges and their settlement dates in advance.
Signs your cash flow forecast needs work
Your forecast probably needs rebuilding if any of these sound familiar:
- It’s last month’s actuals with a percentage added.
- Nobody can say this morning what will leave the bank next week.
- Large invoices reach finance when the vendor calls about them.
- Open purchase orders aren’t in it.
- It’s monthly, so nobody knows the lowest balance inside the month.
- Last week’s forecast is never compared with what actually happened.
- Each entity’s forecast is a different spreadsheet in a different format.
Most of next month’s outflows were decided weeks ago. A good forecast starts by finding where they were written down.
How to build a forecast that stays up to date
- Choose the horizon. Weekly for the next 13 weeks, monthly after that if you need it. Start each week on your payment run day.
- Start from the bank, not from profit. Take the opening balance from the bank statement, then add cash in and take away cash out, week by week.
- Pull each line from where it lives. Invoices from AP, open POs from procurement, payroll from HR, tax from the tax calendar, contracts from the register and employee spend from payout history. Retyping is where errors creep in, so connect what you can.
- Use the date you’ll actually pay. If you pay in a weekly run, an invoice due on Thursday goes out in the run before it. Forecast the run date, not the due date.
- Mark each line known, likely or estimated. Readers know which numbers to lean on, and you know where to look first when the forecast misses.
- Set a minimum balance, and look for the week it’s at risk. Agree the floor with the CFO and write it at the top of the forecast. Its main job is to show the lowest week early enough to act.
- Roll it weekly and compare it with actuals. Drop the week that has passed, add one at the end and compare last week’s forecast with what really left the bank, line by line. Fix the line that misses most first.
- Send every payment through the same door. An urgent payment that skips approval also skips the forecast, and only shows up on the bank statement.
How Procapy helps
In Proca to Pay, the payables side of the forecast comes from the transactions your team already works on. Invoices are received by email, upload or vendor submission, and ProcAI reads the vendor, amount, invoice date, due date, payment terms and any early-payment discount. The clock starts on the day the invoice arrives, so it can’t sit unnoticed in an inbox. Purchase requests are checked against policy and budget before they become commitments, and open commitments are visible to finance before the invoice arrives.
The forward view of outflows is built from approved invoices by due date, invoices still in the approval chain, open purchase orders by expected delivery and recurring commitments. It shows the weeks and months ahead by entity and currency, and updates as each approval lands rather than when someone rebuilds the spreadsheet. Groups paying in several currencies see outflows in each currency and translated to the reporting currency, so treasury can plan funding and FX with the AP pipeline in view. An urgent payment is still a request, with a mandatory reason, an approval and a record.
Payment status posts back to Dynamics, SAP, Xero, QuickBooks or ABSS against each invoice, so the AP ageing reflects what has actually left the bank. Payroll, tax and customer receipts still come from where they live today, but the payables lines, the ones spread across the most inboxes, no longer have to be rebuilt by hand. The cash flow and payments page has more. Book a 30-minute walkthrough, bring your AP ageing and next month’s expected invoices, and we’ll build the payment calendar and the outflow forecast live.