Cash Flow Forecasts

Finger On The Pulse – The Cash Flow Forecast

This page looks at the basics of cash flow forecasting including a sample cash flow forecast. There is a second page that identifies essential operating data and key financial indicators to monitor if you want to be in control of your business.

For all financial monitoring the starting point ought to be the budgets you have put into your business plan for the year – especially your monthly cash flow forecast sheet, which should provide a month-by-month forecast of your income and expenditure. If you are monitoring this you should be in a position to identify potential problems before you reach a cash flow crisis.

The High Level View of the Cash Flow Statement

At the highest level a cash flow statement will tell you:

what money you started with
(cash on hand or the cash you have at the start of the period)
what you paid in or received
(income you received during the period)

1 and 2 added together is the total you received during the period

What you paid out or spent
(outgoings or the money you have spent during the period)

the cash position is the position at the end of the period
(or what you are left with which is 1 + 2 – 3 = 4.)

What you are left with

To conduct effective cash flow monitoring you need your cash flow forecast and statements to be broken down into meaningful budget headings. This will help you to see whether you are on target or where things are not going as expected.

Some Examples of Budget Headings

Cash inflows (income)
- payments for goods or services you have supplied
- interest on savings and investments
- loans or other funding you receive

Cash outflows (expenditure)
- purchase of stock, raw materials or tools
- wages, rents and daily operating expenses
- purchase of fixed assets
- PCs, machinery, office furniture, etc
- loan repayments
- dividend payments
- income tax, corporation tax, VAT and other taxes