In the fast-moving world of agencies, cash flow isn’t just a financial metric—it’s your roadmap to making smart decisions, growing sustainably, and staying resilient through unpredictable client demands. While revenue may look good on paper, CASH IN BANK is reality. Without enough cash to pay bills, salaries, and project expenses, even profitable agencies can run into trouble.
Cash is king, queen and the entire royal family. Ain’t nobody buying dinner tonight with dogecoin.
If your customers are late paying you – you are acting as a bank and giving them a loan whilst you still have to make payroll every fortnight regardless.
This guide will show you how cash flow forecasting can help you stay ahead, avoid unnecessary debt, and confidently plan for the future.
What is Cash Flow Forecasting?
Cash flow forecasting is about anticipating the inflows and outflows of cash within a certain period, usually over 12 months. For agencies, where income fluctuates based on project cycles, retainer clients, and seasonal spikes, forecasting is your financial crystal ball—allowing you to spot potential issues before they arise.
A basic forecast has three components:
- Starting Cash: How much money is in the bank at the beginning of the period.
- Cash Inflows: Expected payments from clients, new projects, or retainer income.
- Cash Outflows: Payroll, software subscriptions, marketing expenses, rent—anything that takes cash out of your business.
Here is how I like to plan future revenue for my Agency clients to help us make decisions with confidence
By tracking these elements, you can clearly see when you’ll have excess cash (and can invest in growth) and when you might face shortfalls (so you can plan ahead).
Why Agencies Need Cash Flow Forecasting
Cash flow forecasting is not just about keeping the lights on—it’s a strategic tool that helps agencies:
1. Plan Hiring and Manage Capacity
Hiring too soon or too late can hurt an agency’s cash flow. A forecast helps you balance staffing decisions with financial reality. By projecting future revenue and expenses, you’ll know exactly when you can afford to bring on new team members. This is especially important during growth phases, where hiring the right people at the right time is crucial.
I use organisation charts to help visualise this – see below
You can the map out this future team, and forecast out their respective costs in a grid view
When planning your future team, you need to use key benchmarks and KPIs to make sure your plans are in balance and won’t send you broke.
This video shows you three KPIs I like to use
Pro Tip: Use rolling forecasts that update every month to adjust for new data and ensure you’re making the best decisions based on real-time cash flow trends.
2. Manage Client Media Spend
For many agencies, media spend is a major cash flow risk. You often pay for ads upfront and get reimbursed by clients later. A well-managed cash flow forecast shows when media spend outpaces your cash inflows and helps you anticipate any delays in client payments.
Actionable Tip:
Collect client media spend in advance if possible. Have a separate credit card where you spend this media to collect points and get some upside, and so we have a clear record of all the spend in once place and it’s not mixed up with your normal business expenses.
Build a buffer into your forecast to cover large media spends, especially during periods of high campaign activity like holidays or product launches. This way, you won’t need to scramble for cash when client payments are delayed.
3. Handle Project Delays and Payment Cycles
Agencies often face delayed payments, scope creep, or project slowdowns, which can throw cash flow out of balance. A forecast lets you plan for these variables. It highlights when you’ll need to chase payments, negotiate tighter payment terms with clients, or adjust project timelines to ensure a healthy cash flow.
Proactive Move: Monitor your accounts receivable closely. If a client is consistently late, factor this into your forecast and communicate openly with them about payments.
Review your aged receivables weekly. Monthly is too long.
Have a separate email alias to chase clients, even if it’s just yourself doing it – it helps make it less awkward when you need to call them later to talk about delivery related stuff.
4. Make Smarter Investment Decisions
Cash flow forecasts show you when it’s safe to reinvest in the business. Whether you’re looking to upgrade your software, hire a senior strategist, or expand your service offerings, forecasting gives you a clear view of when these investments will have the least impact on your cash reserves.
Scenario Planning: Always Prepare for the Unexpected
One of the biggest advantages of forecasting is scenario planning. Every business faces uncertainty—will that key client renew? Is the market about to shift? What if you have to downsize or take on unexpected expenses?
Build your forecast around three core scenarios:
- Best Case: Client payments are on time, projects are moving, and cash is flowing smoothly.
- Moderate Case: Projects hit minor delays, and a few clients pay late, but overall, you’re still able to meet obligations.
- Worst Case: Payments are late, projects are pushed back, and revenue drops. How will your agency survive?
Planning for the worst-case scenario helps you protect against the unexpected, while the best-case scenario gives you a view of your upside potential. When you know both ends of the spectrum, you can make confident decisions in the middle ground.
Tactical Steps for Optimizing Your Cash Flow Forecast
Now that you understand the basics, here are some extra tactical steps to make your forecasting more robust:
1. Use Rolling Forecasts
Don’t set it and forget it. A rolling cash flow forecast updates every month or quarter, allowing you to adjust your forecast based on actual performance. This keeps your projections accurate and relevant, especially in fast-changing environments.
2. Separate Fixed and Variable Costs
Identify your fixed costs (salaries, rent, software subscriptions) and your variable costs (project expenses, contractor fees). This distinction helps you understand how changes in revenue will affect your cash flow and where you can cut costs if needed.
3. Optimize Your Working Capital
Manage working capital by tightening up on accounts receivable, negotiating better payment terms with vendors, and keeping cash reserves for slower months. Set up a system that automatically tracks late payments and sends reminders to clients.
4. Set Payment Milestones
For larger projects, break down payments into milestones. This ensures you’re not waiting until project completion to get paid, smoothing out your cash inflows over the life of the project.
Common Cash Flow Mistakes to Avoid
Even the best agencies can fall into these cash flow traps:
- Overestimating Revenue: It’s easy to assume the next quarter will be your best yet, but this can lead to trouble. Be realistic and build forecasts around conservative estimates.
- Forgetting Seasonal Fluctuations: Many agencies experience seasonal variations. Don’t forget to account for slower periods when building your forecast.
- Ignoring Expenses: Small, recurring costs add up quickly. Include every expense—no matter how small—in your cash flow forecast to avoid surprises.
- Not Communicating Internally: Keep your entire team (not just finance) in the loop. Every department should understand how cash flow impacts hiring, spending, and decision-making.
Final Thoughts: Cash Flow Forecasting is Your Agency’s Safety Net
Cash flow forecasting isn’t just about avoiding cash crunches—it’s about making your agency resilient, proactive, and ready to grow. By forecasting consistently, planning for multiple scenarios, and managing your working capital wisely, you can confidently hire, invest, and grow.
Remember: Revenue is vanity, profit is sanity, but cash is reality. Take charge of your cash flow today, and you’ll lead your agency to sustainable growth tomorrow.
Good luck, I believe in you!
If your still struggling to get your head around this stuff – please get in touch. This is what we love doing for our clients every week.
