A cash projection is an estimate of how much cash a business may have in the future based on the cash it has today and the money expected to come in and go out.
For a small business owner, a cash projection provides a forward-looking view of the business's cash position.
Instead of looking only at the amount of cash available today, a projection shows how that amount may change over a future period.
What Information Is Used in a Cash Projection?
A cash projection starts with the cash the business currently has and considers expected cash activity ahead.
That may include:
customer payments expected to be received
upcoming bills
recurring expenses
scheduled payments
other expected cash coming into or leaving the business
Together, those amounts create an estimate of what the business's cash position may look like at different points in the future.
What Does a Cash Projection Show?
Suppose a business currently has $10,000 in cash.
Over the next 30 days, the business expects to receive $6,000 from customers and pay $8,000 in expenses.
Based on those expected transactions, the projected cash balance at the end of the period would be $8,000.
The projection shows how the current cash position may change if the expected cash activity occurs as planned.
Is a Cash Projection an Exact Future Balance?
A cash projection is based on information known or expected at the time it is created.
Actual cash activity may be different.
A customer may pay later than expected. An expense may change. An unexpected purchase may arise. New income may also come into the business.
As that information changes, the projection can change as well.
For that reason, a cash projection represents an expected future cash position rather than a guaranteed balance.
Why Can a Cash Projection Change?
Cash projections change when the timing or amount of expected cash activity changes.
For example, a payment expected this week may arrive next week instead. A bill may be higher than originally expected. A planned expense may be postponed.
Each change affects the projected cash position for the period being reviewed.
Updating those expectations keeps the projection connected to the information currently available.
How Far Ahead Can a Cash Projection Look?
A cash projection can cover different periods depending on what the business owner wants to review.
A short-term projection might look several days or weeks ahead. A longer projection may extend several months.
The farther into the future a projection looks, the more likely the underlying information may change.
Each time period provides a different view of how expected cash activity may affect the business.
How Business Cash Manager Shows Cash Projections
Business Cash Manager uses your current cash information together with expected money coming in and going out to provide forward-looking cash views.
You can review projected cash over different periods to see how known cash activity may affect the amount of cash the business has ahead.
A cash projection gives you a way to look beyond today's cash position and see how current expectations may shape the cash available in the future.
