cash flow planning
The process of projecting future income and expenses to ensure sufficient funds are available when needed.
Example
“Cash flow planning identified a $3,000 shortfall in November that they could prepare for in advance.”
Memory Tip
PLANNING the FLOW — knowing when money arrives and leaves before it happens.
Why It Matters
Cash flow planning helps you avoid running out of money during lean months and ensures you can cover unexpected expenses without going into debt. It gives you a clear picture of your financial health and allows you to make informed decisions about spending, saving, and investing.
Common Misconception
Many people believe that as long as they earn enough money overall, they do not need to worry about cash flow planning. However, even high earners can face serious problems if their income arrives in irregular lump sums while their expenses occur monthly.
In Practice
A freelancer who earns 60000 dollars per year might receive three large payments of 20000 dollars each, but their rent, utilities, and groceries total 4000 dollars every month. Without cash flow planning, they might run out of money in months two and three despite having sufficient annual income. By mapping out when payments arrive and when bills are due, they can set aside reserves from large payments to cover the lean months.
Etymology
From Old Norse 'kassa' plus Old English 'flowan' — planning the flow of money over time.
Common Misspellings
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See Also
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