Plain definition
Cash forecast variance compares actual closing cash with the approved forecast closing cash for the same date.
Cash forecast variance = actual closing cash − forecast closing cashA negative result means actual cash was lower than forecast.
Use the forecast version approved at the start of the review period. Classify each difference as timing, amount, or omission.
Worked example
Monetary examples use Saudi riyals (SAR). The same principles apply in other currencies.
A company forecast closing cash of .
Actual closing cash on the same date was .
| Actual closing cash | |
|---|---|
| Forecast closing cash | |
| Cash forecast variance |
| Customer timing | |
|---|---|
| Supplier amount | |
| Omitted fee | |
| Total shortfall against forecast |
Actual cash closed below forecast. The difference consists of in customer timing, in supplier amount, and an omitted fee of .
Why it matters
These are three different problems.
Calling all of them “forecast error” hides the correction each one requires.
A timing issue needs a revised date. An amount issue may expose a weak assumption.
An omission may show that a data source or review control is missing.
Practical consequence
Build a weekly forecast-to-actual bridge.
Reconcile the approved forecast closing balance to the actual closing balance.
Assign an owner to every material variance and update the assumption or data source behind it.
Move a genuine timing variance to its revised expected date. Do not treat it as resolved merely because it has been explained.
Try your own numbers
Map expected cash in and out week by week, then see the lowest point before it arrives.
13-week cash-flow forecast