Cash Flow Forecasts. What’s the point?. Why you need them. It’s essential for businesses to know when income will be received and when bills will be paid. This ensures sufficient cash is available It helps review actual figures against the budget Corrective action can be taken early
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What’s the point?
It’s essential for businesses to know when income will be received and when bills will be paid.
This ensures sufficient cash is available
It helps review actual figures against the budget
Corrective action can be taken early
Today’s decisions affect future cash flow
Sales are lower than planned
Debtors pay later than anticipated
Bad debts are higher than forecast
Interest rates rise
Profit = difference between the total amount your business earns and all of its costs.
You may be able to forecast a good profit for the year yet still face times when you are strapped for cash.
Payment for goods/services from your customers
Receipt of a loan
Interest on savings and investments
Increased bank overdrafts/loans
Purchases of stock or tools
Wages, rent and daily operating expenses
Purchase of fixed assets (machinery, PC’s, office furniture etc.)
Income tax, VAT and other taxes
Asking customers to pay sooner
Chase debts promptly
Ask for extended credit terms
Order less stock but more often
Lease rather than buy (premises, tools)
How many new customers do you gain each year?
How many customers do you lose each year?
What is the average level of sales you make to each customer?
Are there particular months where you acquire or lose more customers than usual?
Every year is different
You need to list any changing circumstances that could significantly affect your sales.
These factors - known as the sales forecast assumptions - form the basis of your forecast.
Ignoring your own assumptions
Moving goal posts
Tool: COBRA: accessed for free from Rise Up team in The Careers Service (market research tool)
Book: The Entrepreneurs Book of Checklists by Robert Ashton