Cash flow is the movement of money in and out over time. It is not the same as being profitable, and it is not the same as being wealthy. Plenty of solvent households and businesses run into difficulty simply because money arrives later than it leaves.
Stock versus flow
Net worth is a stock: what you own minus what you owe on a single day. Cash flow is a flow: what moves through your accounts across weeks and months. A projection turns the flow into something you can look at in advance instead of reconstructing afterwards.
Building a twelve-month projection
A basic projection needs four ingredients:
- Opening balance. The accessible cash you start with.
- Recurring inflows. Salary, invoices, rent received, regular transfers.
- Recurring outflows. Housing, utilities, loan repayments, subscriptions, everyday spending.
- One-off events. An annual insurance premium, a tax payment, a holiday, a car repair, a bonus.
Each month, the closing balance is the opening balance plus inflows minus outflows. The closing balance becomes next month's opening balance. That chain is what makes timing visible.
A worked example
A household starts with €6,000 accessible cash, receives €3,400 a month and spends €3,050 a month. The monthly surplus is €350, so on an annual view the year looks comfortable: roughly €4,200 added. But an insurance premium of €1,100 falls in March and a €2,600 tax payment falls in July. Mapped month by month, the balance dips to around €1,800 in July before recovering. The year-end figure never showed that; the monthly path did.
Reading the shape, not just the endpoint
Three things are worth reading in any projection:
- The lowest point. The month with the smallest balance is the real constraint.
- The trend. Whether the underlying balance rises, flattens or erodes once one-off items are set aside.
- The margin. How large a surprise the projection could absorb without going negative.
Projections are assumptions, not forecasts
Every projection carries assumptions: that income continues, that spending stays broadly stable, that the one-off items listed are the only ones. Actual outcomes may differ materially. A projection is most useful as a way of seeing which assumption matters most, not as a prediction of what will happen.
Where AI-assisted analysis fits
AI-assisted analysis may help by organising the information you supplied, comparing one projection against another, identifying potential patterns in the timing of inflows and outflows, and highlighting months that appear to warrant attention. AI-generated observations can provide an additional analytical perspective alongside the calculated figures — they do not replace them and do not decide anything on your behalf.
Results depend on the information and assumptions provided, and should be reviewed critically.
Understand, assess, explore, plan
Cash flow sits between understanding your position and planning around it. If you have not yet assembled the position itself, start with the financial healthcheck. If you want to test a specific change against your baseline, that is what-if analysis.