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Why timing matters even when a sale looks profitable

A cash-flow forecast tracks when money is expected to arrive and leave.

A projected cash-flow statement sets expected receipts and payments against time. Its central question is whether cash will be available when a payment falls due. Revenue recorded from a sale and cash received from the customer may occur at different times.

That makes timing visible in a way a simple total can miss. A forecast is built on assumptions about collections, purchases and other payments, so it needs revision when those assumptions change. It describes a possible path, not a guarantee.

A small example

A workshop pays for materials this week but expects the customer to pay next month. The order may have a positive margin while creating a cash gap today.

Keep in mind

This illustrates an accounting distinction, not a financing recommendation for a particular business.

Source & attribution

Entrepreneurship — Conducting a Feasibility Analysis

Michael Laverty, Chris Littel · OpenStax, Rice University

CC BY 4.0. Rewritten as a self-contained explanation; the example and reflection are Vakataka additions. Written and edited with AI assistance. No source images reproduced.

Source edition: 2024-09-19T14:14:54Z

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