Cash Flow Forecasting

Small business start up information

A cash flow forecast shows the critical outflows and inflows of cash during a certain month. Cash flow forecasting enables you to estimate whether you will have sufficient cash to fund your future financial commitments and obligations over a set period of time.

There is a distinct difference between profit and cash.  Profits may be tied up in the form of stock, debtors and or other assets. If assets cannot be readily converted to cash and consequently the business may not be able to meet its debts as they fall due. If this happens, your suppliers may decide not to supply your business with necessary
materials or they may take legal action. It could also stop you from trading. 

Why should you prepare a cash flow forecast?

Used properly, this will provide you with the means to keep your business decision-making on track and your inventory purchasing in control. It will also serve as an early warning indicator when your expenditures are running out of line or your sales targets are not being met.

As the manager of your cash, you will have enough time to devise remedies for anticipated temporary cash shortfalls and ample opportunity to arrange short-term investments for the business' temporary cash flow surpluses.

Reliable cash flow projections can bring a sense of order and well being to your business and more calm to your life. The most important tool owners/managers have available to control the financial aspects of their business is the cash flow forecast worksheet. 

How to make the most use of your cash flow

When preparing your cash flow forecast, be realistic, don’t expect to make sales which are simply unattainable.  Don’t understate expenses because it will look better on the bottom line.

We have prepared a cash flow forecast template in excel, feel free to download your copy here.
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