The Cash Flow Forecast section of the Financial Plan, part of writing a business plan, concentrates on your cash flow and how to forecast this information. This is a crucial part of the Business Plan, especially for a small business.
Cash Forecast
When looking at the flow of your businesses cash you need to consider some of the following points:
- Will your sales be on a cash or a credit basis? If it is on a credit basis, on average how long will it be before you receive the cash?
- Will there be any other sources of income coming in during the year?
- When will you be paying your taxes throughout the year?
- When will you be paying your bills?
- When will you be drawing an income from the business?
- Do you have any major purchases throughout the year (a fixed asset perhaps) that will need paying for?
Again make sure you list any assumptions. So, what information do we need to project the flow of cash? Some of the below are an indication:
- Receipts – sales and other revenue such as dividend and interest income.
- Less payments – such as those related to your Cost of Goods and manufacturing wages.
- Less operating expenses such as utility bills, administration, vehicles, cleaning
- Less other overheads such as administration wages, rent etc.
- Less the purchase of any fixed assets.
This projection should be for the first year of trading and split monthly.
Please note – Your ‘Net Flow’ Total should equal your ‘Closing Bank’ total.
So, to sum up the flow of cash will track the changes in your cash position over a set period of time. The top section showing the income and the lower section showing exactly where the money is going. A Cash projection should be updated regularly.
Go to the top of the
Cash Flow
page, return to the
Financial Plan
page, or go to
Writing a Business Plan
