Projecting Cash Flow

Cash flow is king for small businesses and the self-employed. But planning cash flow is easier said than done, especially if you’re not a numbers person. However, if you’re going to succeed in business, mastering basic cash flow projections is a must. After all, you can be a profitable business yet still have poor cash flow, simply because the cycle of cash in and out of your business is not synchronized.

There are rules and techniques to projecting Cash Flow:

  1. Do not predetermine how much money you think you need. Let the “numbers talk.” Your cash flow projection will identify how much money you need.
  2. Prepare a thoughtful, comprehensive cash flow projection. “Operate” your business on paper.
  3. Start your business or project with zero money as “beginning cash.” If you already have a specific amount of cash available for starting yourbusiness or project, include that specific amount as “beginning cash.”
  4. Calculate the cash flow. It is likely that you will have negative cash for several months until cash generated from sales begins to flow in.
  5. On your cash flow projection, find the month that has the largest amount of negative cash.

      This is the amount of money, plus interest and borrowing cost, your business will need.


It depends. Can you borrow it? Do you have sufficient collateral and good credit? You may be able to go to a bank. Commercial lenders lend money based on their analysis of the potential for failure. If you fail to pay the loan, they can repossess your collateral and sell it to cover their debt. If you have a good credit history, they consider it, in part, a secondary source of repayment. A good credit history verifies and validates that you have taken your debts seriously and paid them.

Do you not have sufficient collateral, or a less than perfect credit history? A non-traditional lender may be a choice for you. They analyze your potential for success. Since you do not have sufficient collateral that could be liquidated in the event you don’t repay the debt, the only option is to validate and verify your opportunities for success.


How can your opportunities for success be verified and validated by stranger – a prospective lender or investor? By reading your business plan, studying your cash flow projections, talking to you, doing their homework. This process is called due diligence.

Due diligence is the process of verifying and validating, whenever possible with third-parties, that the assumptions and declarations you are making have a reasonable opportunity for success.


Lenders perform their own due diligence, and relationships of sources and uses are very important to them.

If all the money for a startup or expansion is borrowed, and the owner has made no contributions, who is taking all of the risk?

If a loan of $50,000 is being requested, and there is no security for the loan in the form of assets, who has something to lose?

Your projected cash flow will be critical to “selling” the success of your business to a lender.

The more thought, time and energy you put into this effort, the greater the reward.

You will have “figured out” how to achieve your dream, or you will have taken risk “on paper,” and determined that your dream could be a nightmare instead.

The process of revising your cash flow, changing your mind, altering your plan, and letting the numbers “talk” the language of business to you will help you understand the choices you have.

You can “step” yourself into business by taking calculated risks. You can “leap” yourself into business by taking great risks.

You can decide that you don’t want to do this business at all.

In any case, you will have made your choices based on logic and planning, instead of wishing and hoping.

Avi Werde

Avi started his business life at a very young age, which has allowed him to explore many industries. After finishing his studies as a music student he went on to other areas in the hospitality industry expanding his knowledge and experience to the point that he felt unsatisfied by the restraints and slow progressions of working for another leading him to create his company Werde Productions.

This new venture brought Avi national and international attention as the world was to experience their first large scale Jewish wedding expo, opening doors that he has been yearning to open. He has since been involved with projects such as Concerts, Galas, Art Shows, Art installations, Fashion shows, managing event spaces, birthdays, product launches, corporate events, Festival management, parties, event marketing, PR, the works.