Cash Flow Forecasting in a Volatile Economy: 2025–2026 Best Practices

As market conditions continue shifting throughout 2025 and into 2026, cash flow has become one of the most
critical areas for business owners to monitor. With interest rate uncertainty, inconsistent consumer demand,
and rising operational costs, having a reliable cash flow forecast is no longer optional—it is a core
financial discipline that protects the long-term stability of your business.

At our firm, we work closely with businesses across multiple industries, and one theme is universal:
companies that consistently forecast and update their cash flow models are far better positioned to make
confident decisions, avoid cash crunches, and maintain growth even in volatile periods. This guide outlines
the essential best practices your business should follow for 2025–2026.

Why Cash Flow Forecasting Matters More in 2025–2026

Economic volatility introduces fast-moving variables that can impact liquidity in ways businesses may not
expect. Forecasting gives you visibility into:

• Timing of cash inflows and outflows — letting you prepare for tight periods.
• Profit–cash discrepancies — ensuring that positive revenue doesn’t mask cash shortages.
• Operational risk factors — such as supply chain delays or late customer payments.
• Strategic planning — determining when to invest, hire, or reduce expenses.

In an unpredictable environment, your ability to see future liquidity needs becomes a competitive advantage.

1. Build a Rolling 13-Week Cash Flow Model

A 13-week cash flow forecast is the gold standard for short-term planning. It offers a granular view of cash
movement and lets you adjust quickly as conditions change.

• Update it weekly with real data.
• Include all expected inflows (customer payments, recurring revenue, loans).
• Detail all outflows (payroll, rent, inventory purchases, taxes, and debt payments).
• Use conservative assumptions—especially for variable income streams.

This approach provides near-real-time insight into the health of your cash position and helps prevent
surprises.

2. Stress-Test Your Forecast

With the volatility expected through 2026, businesses should prepare multiple scenarios. Try modeling:

• Best-case: steady customer demand and timely payments.
• Moderate-case: small declines in revenue or slightly higher costs.
• Worst-case: delayed receivables, increased prices from vendors, or a supply slowdown.

Stress-testing gives you the ability to respond before issues become severe, offering options like adjusting
spending, renegotiating vendor terms, or securing lines of credit early.

3. Improve Receivables and Payment Behavior

One of the fastest ways to strengthen cash flow is to accelerate receivables. Consider:

• Requiring deposits or milestone payments for large projects.
• Offering small early-payment discounts.
• Sending automated invoice reminders.
• Tightening credit policies for chronically late customers.

Many businesses see immediate improvement simply by implementing stronger AR procedures.

4. Review and Renegotiate Vendor Terms

As costs rise, your vendor relationships can play a major role in cash flow stability. Ask suppliers about:

• Extended payment terms (e.g., moving from Net-30 to Net-45 or Net-60).
• Bulk-order discounts that lower your cost per unit.
• Flexible delivery schedules to reduce unnecessary inventory buildup.

Even small adjustments can create meaningful improvements in liquidity.

5. Build and Maintain a Cash Reserve

The ideal reserve depends on your industry and risk profile, but most businesses should target at least:
1–3 months of operating expenses.
Higher-risk or seasonal businesses may need more.

Building reserves gradually—using a percentage of monthly net cash inflow—can help stabilize operations
during unpredictable periods.

6. Use Technology to Streamline Cash Flow Monitoring

Accounting and cash-flow tools have improved significantly in recent years. Cloud-based platforms can:

• Automate forecasts using real transaction data.
• Provide dashboards for real-time visibility.
• Integrate with invoicing, payroll, and inventory systems.
• Reduce manual errors and save hours of administrative work.

Our firm can assist in choosing and setting up software that aligns with your industry and cash management
needs.

7. Plan for Tax Obligations in Advance

Tax liabilities can quickly disrupt cash flow when not planned for. For 2025–2026, consider:

• Quarterly tax projections based on updated performance.
• Setting aside funds each month for upcoming tax deadlines.
• Evaluating potential tax credits or deductions that reduce obligations.
• Identifying state-level changes that may impact payroll or business taxes.

Predictable tax planning protects your liquidity and helps you avoid unnecessary penalties.

8. Review Operational Spending and Profit Margins

Volatility often exposes inefficiencies. This is the perfect time to review:

• Subscription services that are unused or duplicated.
• Payroll costs compared with business demand.
• Margin performance across products or service lines.
• Supplier pricing increases that may require adjustments to your pricing model.

Cash flow forecasting shows exactly where spending needs to be tightened.

9. Work Closely With Your Accountant

Cash flow becomes far easier to manage when you have professional support analyzing trends, identifying
vulnerabilities, and helping you build a long-term plan. Our team can help you:

• Create or refine your 13-week and annual cash flow forecasts.
• Run scenario analyses tailored to your industry.
• Review tax strategies that support liquidity.
• Set up accounting tools for automated forecasting.

The businesses that succeed in volatile periods are the ones that plan ahead.

Final Thoughts

Cash flow forecasting is not just an accounting exercise—it is a strategic foundation for navigating the
economic uncertainty expected through 2025 and 2026. With the right structure, technology, and professional
guidance, your business can maintain stability, protect profitability, and position itself for growth even in
challenging environments.

If you’d like help developing or improving your cash flow strategy, our team is here to support you.

approved by Kacy L. Allen