What is cash flow, and how do you build a forecast?

Cash flow is the money moving in and out of a business’s cash and bank accounts. Inflows are mostly customer receipts, loans drawn, and maturing deposits. Outflows are vendor payments, salaries, taxes, contributions to the Social Security Institution (SGK), rent, and loan installments.

Subtract a period’s outflows from its inflows, and you have that period’s net cash flow.

Why are profit and cash different?

A profitable business can still run out of cash, because the date income and expenses are recorded and the date money changes hands are often not the same:

• On a sale with payment terms, you issue the invoice and book the revenue today, but the money arrives on the due date, sometimes later.
• You often pay for stock before the goods are sold.
• The principal portion of a loan installment isn’t an expense, but it still leaves your account.
• VAT collected on sales isn’t income. Under Article 29 of the Value Added Tax Law (Katma Değer Vergisi Kanunu), a taxpayer can deduct the VAT shown on its purchase invoices from the VAT it has charged, and pays the tax office the difference.
• A check you receive doesn’t turn into cash before its due date.

That’s why businesses track their cash position separately from profit and loss. The cash flow statement, which shows the cash movements of a past period, is a financial statement. What management looks at when making decisions is the forward-looking cash flow forecast.

How do you build a cash flow forecast?

1. Starting point: work out the cash you can actually spend today. Subtract blocked amounts from your cash and bank balances. Keep unused credit lines separate, because they’re a way to borrow, not cash.
2. Expected inflows: list receivables coming due, checks and promissory notes in your portfolio, and orders still to be invoiced, with their dates. If a customer doesn’t pay on time, shift the date based on their payment history.
3. Expected outflows: add vendor payables, loan and tax installments, card statements, and recurring payments that have no document behind them (payroll, SGK contributions, rent). Undocumented items are the easiest to miss.
4. Periods and threshold: split the forecast into days, weeks, or months, and compare each period’s closing balance with a minimum cash level. The first period where the balance drops below that level is when you need to act: speed up collections, delay payments, or find financing.

A good forecast keeps firm information apart from estimates. A check with a known due date and a collection estimated from past payment behavior aren’t equally reliable.

Cash flow in IWB

In IWB, you track cash flow with the cash flow forecast in Finance. The forecast draws on 19 sources. Finance supplies open customer and vendor items, checks and promissory notes, loan and tax installments, corporate card statements, guarantees, time deposits, and future-dated bank transactions.

Accounting supplies VAT payable and, optionally, the approved budget. Sales and purchase orders and contract billing schedules come from their own modules. Obligations with no document, such as payroll, SGK contributions, and rent, are added to the forecast from ready-made templates and matched with the real document when it arrives.

You can view the forecast over 4 weeks, 13 weeks, or 12 months, by day, week, or month. Available cash is shown net of blocked amounts. Undrawn credit sits separately and doesn’t count as cash, and unpaid card statements show as liabilities.

You set a minimum cash threshold for each currency. Any period where the balance drops below it is flagged, and IWB sends an in-app notification. The “If receipts run late” option shows how the forecast changes if collections come in late.

Each line shows where its due date comes from: fixed due date, derived, estimated, or undated. The expected collection date is set by hand, from the payment terms, or from the customer’s payment history over the last 24 months. Items with no due date sit in a separate list and stay out of the forecast.

You can save a snapshot of the forecast on a given day and later compare the current position with it in the “Forecast variance” view. Viewing cash flow is a separate permission from viewing customer and vendor accounts. The forecast is for management and doesn’t replace the statutory cash flow statement.