# Cash Flow Forecast vs Cash Flow Statement: The Difference Explained

Source: https://www.cashflowforecasttemplates.co.uk/guides/cash-flow-forecast-vs-cash-flow-statement-the-difference-explained
Updated: September 25, 2026

> A cash flow statement is a historical financial statement that reports how cash changed over a past period, grouped into operating, investing and financing activities. A cash flow forecast is a forward-looking planning tool that predicts receipts, payments and bank balance week by week or month by month. The statement tells you what happened; the forecast helps you decide what to do next.

The two names sound almost identical, and both are about cash. But a **cash flow statement** and a **cash flow forecast** do opposite jobs: one looks back, the other looks forward. Knowing the difference helps you read your accounts, talk to lenders and build a better forecast.

## The difference at a glance

| | Cash flow statement | Cash flow forecast |
|---|---|---|
| Direction | Backwards: what happened | Forwards: what will happen |
| Part of | Your financial statements | Your planning and management |
| Prepared by | Accountant or accounting software | You, or your finance team |
| Period | A completed month, quarter or year | Next 13 weeks, 12 months, sometimes 3 years |
| Detail | Summarised in three sections | Line by line, week by week or month by month |
| Rules | Follows accounting standards | Whatever format is most useful |
| Used for | Reporting, tax, lenders, investors | Decisions: hiring, spending, funding |

## What a cash flow statement shows

The statement explains how your cash balance changed over a past period, in three sections:

1. **Operating activities:** cash from day-to-day trading. Often presented using the indirect method: profit, plus non-cash costs such as depreciation, adjusted for changes in money owed by customers, stock and money owed to suppliers.
2. **Investing activities:** buying or selling equipment, property, vehicles and investments.
3. **Financing activities:** loans received and repaid, owner or investor money in, dividends or drawings out.

The three add up to the change in cash between the start and end of the period.

### Example

| Section | Amount |
|---|---|
| Operating activities | +62,000 |
| Investing activities (van purchased) | −38,000 |
| Financing activities (loan repayments) | −18,000 |
| **Net change in cash** | **+6,000** |

The business generated $62,000 from trading but only kept $6,000, because of the van and loan repayments. That’s valuable to know, but it’s history.

## What a cash flow forecast shows

A forecast predicts cash in and out, usually line by line, for each week or month ahead: customer receipts, payroll, rent, suppliers, tax, loan repayments. It shows the closing bank balance for each period and highlights any that fall below your minimum. It’s built for decisions, not reporting. See [what is a cash flow forecast](/guides/what-is-a-cash-flow-forecast) for the full explanation.

## How they work together

### Use the statement to build the forecast

Last year’s statement and bank records show:

- how much cash your trading really generates
- how much you spent on equipment and other assets
- your loan repayments and drawings
- how much cash was tied up in money owed by customers and in stock

Those are the starting assumptions for next year’s forecast.

### Use the forecast to explain the next statement

When next year’s statement arrives, compare it with what you forecast. Big differences point to assumptions that need changing: perhaps customers paid more slowly, or equipment spending was higher.

### Use both with lenders

Lenders want historical statements to show your track record, and a forecast to show you can repay. A forecast that’s consistent with past statements is far more convincing than one that suddenly shows everything improving.

## Three questions to ask of your own statement

When your accountant sends your cash flow statement, read it with these questions in mind. The answers feed straight into your forecast.

1. **Is trading generating cash?** If operating cash flow is much lower than profit, look for money tied up in customer debts or stock. Your forecast should reflect how long customers really take to pay and how much stock you really carry.
2. **What did we invest, and will we again?** Equipment, vehicles and fit-outs appear under investing activities. If you replace vehicles every four years, the forecast should show the next replacement in the right year.
3. **How much went to lenders and owners?** Loan repayments, drawings and dividends under financing activities are cash that trading has to fund. If they took most of the operating cash last year, the forecast will show little room for surprises.

Answering these takes ten minutes and often reveals the single most important assumption in next year’s forecast.

## Direct and indirect methods

Cash flow statements often use the **indirect method**, starting from profit and adjusting it. Forecasts for small businesses usually use the **direct method**, listing actual receipts and payments, because that’s what you manage day to day. Both arrive at the same change in cash; they just start from different places.

## Timing: when each is prepared

A cash flow statement is prepared after a period ends, often weeks or months later for annual accounts. By the time you read it, the cash it describes is long gone. A forecast is prepared before the period starts and updated as it goes, which is why it’s the tool for decisions. Monthly management accounts sit in between: if your bookkeeper produces a monthly cash summary, use it to replace forecast figures with actuals every month.

## Common confusions

- **“My accountant gave me a cash flow statement, so I have a forecast.”** You have last year’s history. It doesn’t tell you about next month.
- **“The forecast doesn’t match the accounts.”** A forecast is a plan made in advance; differences are expected and useful.
- **“Profit is in the statement, so cash must be fine.”** The statement explains why cash and profit differ; see [cash flow vs profit](/guides/cash-flow-vs-profit-why-profitable-businesses-run-out-of-cash).

## Which do you need?

Every business with formal accounts has a cash flow statement, whether you read it or not. Every business that could be caught short of cash needs a forecast. If you have only the statement, add a forecast; the [how-to guide](/guides/how-to-make-a-cash-flow-forecast) shows how, and the template below makes it quick.


## A practical routine

At each year end, when your accounts are finalised, sit down with the cash flow statement and your forecast for the same year. Note three things: where trading cash differed from your forecast, where spending on equipment and assets differed, and where financing (loans, drawings) differed. Then carry those lessons into the new year’s forecast. Over two or three years, this simple habit makes your forecasts much more reliable, and your conversations with lenders much easier, because you can show you forecast well and explain the differences when you don’t.

### Is a cash flow statement the same as a cash flow forecast?
No. A statement reports past cash movements as part of your accounts; a forecast predicts future ones to help you plan.

### Who prepares a cash flow statement?
Usually your accountant or accounting software, as part of the annual or monthly accounts.

### Can I build a forecast from a cash flow statement?
Yes. Last year’s statement shows the size and pattern of your cash flows, which is a good starting point for next year’s forecast.

### Which one do lenders want?
Usually both: historical statements to show your track record, and a forecast to show you can repay.

### What are the three sections of a cash flow statement?
Operating activities (day-to-day trading), investing activities (buying and selling assets) and financing activities (loans, equity and dividends).