What is the difference between a cash flow forecast and a cash flow statement?

Cash flow forecast vs cash flow statement

Two financial accounting reports include cash flow forecasts and cash flow statements. So let’s take a look at both and what the differences are between them.

So what is the difference between a cash flow forecast and a cash flow statement? The difference between a cash flow forecast and a cash flow statement is that a cash flow forecast or projection is looking into the future to predict future cash flows. Whereas a cash flow statement is a report of actual transactions that have already taken place.

What is a cash flow forecast?

A cash flow forecast is a plan that shows how much money a business expects to receive in and pay out over a given period of time. Cash flow forecasts or projections look into the future to predict future cash flows.

A cash flow forecast is used for business planning. But also, cash and profit forecasts can be used for the purpose of raising money for the business. The money raised can either be in the form of bank finance or as venture capital finance.

Cash flow forecasts are different to profit forecasts. Profit is based on when income is earned and when costs are incurred. Whereas a cash flow forecast is based on when income is received and costs are paid out.

More Reading: How to estimate future cash flows (Calculating future working capital)

What is a cash flow statement?

A cash flow statement is also known as statement of cash flows. A cash flow statement is a financial statement or report that summarises the changes in balance sheet amounts and income that affect the net increase or decrease in cash and cash equivalents. But the report represents transactions that has already taken place.

This financial statement is designed to break down into the following main headings:

• Cash flows from operating activities, which leads to ‘Cash from operations‘ and ‘Net cash generated from operating activities‘.
• Cash flows from investing activities.
• Net cash used in financing activities.
• Net increase/(decrease) in cash and cash equivalents.

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