cash flow projection in a business plan

• Cash Flow Projection – The Comple...

Cash Flow Projection – The Complete Guide

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Key Takeaways

• Cash flow projection is a vital tool for financial decision-making, providing a clear view of future cash movements.
• Cash flow is crucial for business survival and includes managing cash effectively and providing a financial planning roadmap.
• Automation in cash flow management is a game-changer. It enhances accuracy, efficiency, and scalability in projecting cash flows, helping businesses avoid common pitfalls.

Introduction

Cash flow is the lifeblood of any business. Yet, many companies constantly face the looming threat of cash shortages, often leading to their downfall. Despite its paramount importance, cash flow management can be overwhelming, leaving businesses uncertain about their financial stability.

But fear not, there’s a straightforward solution to this common problem – cash flow projection. By mastering the art of cash flow projection, you can gain better control over your finances and steer your business away from potential financial crises. Cash flow projections offer a proactive approach to managing cash flow, enabling you to anticipate challenges and make informed decisions to safeguard the future of your business.

If you’re unsure how to accurately perform cash flow projections or if you’re new to the concept altogether, this article explains everything you need to know, provides you with a step-by-step guide to preparing cash flow projections and highlights the key role automation plays in enhancing the effectiveness of these projections. 

What Is Cash Flow Projection?

Cash flow projection is a financial forecast that estimates the future inflows and outflows of cash for a specified period, typically using a cash flow projection template. It helps businesses anticipate liquidity needs, plan investments, and ensure financial stability.

Think of cash flow projection as a financial crystal ball that allows you to peek into the future of your business’s cash movements. It involves mapping out the expected cash inflows (receivables) from sales, investments, and financing activities and the anticipated cash outflows (payables) for expenses, investments, and debt repayments.

It provides invaluable foresight into your business’s anticipated cash position, helping you plan for potential shortfalls, identify surplus funds, and make informed financial decisions.

Why Are Cash Flow Projections Important for Your Business?

Managing cash flow is a critical aspect of running a successful business. It can be the determining factor between flourishing and filing for Chapter 11  bankruptcy .

In fact, studies reveal that 30% of business failures stem from running out of money. To avoid such a fate, by understanding and predicting the inflow and outflow of cash, businesses can make informed decisions, plan effectively, and steer clear of potential financial disasters.

Calculating projected cash flow is a crucial process for businesses to anticipate their future financial health and make informed decisions. This process involves forecasting expected cash inflows and outflows over a specific period using historical data, sales forecasts, expense projections, and other relevant information. Regularly updating and reviewing projected cash flow helps businesses identify potential cash shortages or surpluses, allowing for proactive cash management strategies and financial planning.

Cash Flow Projection vs. Cash Flow Forecast

Having control over your cash flow is the key to a successful business. By understanding the differences between cash flow forecasts and projections, business owners can use these tools more effectively to manage their finances and plan for the future. 

Step-by-Step Guide to Creating a Cash Flow Projection

An effective cash flow projection enables better management of business finances. Here is a step-by-step process to create cash flow projections:

Step 1: Choose the type of projection model

• Determine the appropriate projection model based on your business needs and planning horizon.
• Consider the following factors when choosing a projection model:
• Short-term projections : Covering 3-12 months, these projections are suitable for immediate planning and monitoring.
• Long-term projections : Extending beyond 12 months, these projections provide insights for strategic decision-making and future planning.
• Combination approach : Use a combination of short-term and long-term projections to address both immediate and long-range goals.

Step 2: Gather historical data and sales information

• Collect relevant historical financial data, including cash inflows and outflows from previous periods.
• Analyze sales information, considering seasonality, customer payment patterns, and market trends.

Pro Tip: Finance teams often utilize accounting software to ingest a range of historical and transactional data. 

Step 3: Project cash inflows

• Estimate cash inflows based on sales forecasts, considering factors such as payment terms and collection periods.
• Utilize historical data and market insights to refine your projections.

Step 4: Estimate cash outflows

• Identify and categorize various cash outflow components, such as operating expenses, loan repayments, supplier payments, and taxes.
• Use historical data and expense forecasts to estimate the timing and amount of cash outflows.

Pro Tip: By referencing the cash flow statement, you can identify the sources of cash inflows and outflow s. 

Step 5: Calculate opening and closing balances

• Calculate the opening balance for each period, which represents the cash available at the beginning of the period.
• Opening Balance = Previous Closing Balance
• Calculate the closing balance by considering the opening balance, cash inflows, and cash outflows for the period.
• Closing Balance = Opening Balance + Cash Inflows – Cash Outflows

Step 6: Account for timing and payment terms

• Consider the timing of cash inflows and outflows to create a realistic cash flow timeline.
• Account for payment terms with customers and suppliers to align projections with cash movements.

Step 7: Calculate net cash flow

• Calculate the net cash flow for each period, which represents the difference between cash inflows and cash outflows.
• Net Cash Flow = Cash Inflows – Cash Outflows

Pro Tip: Calculating the net cash flow for each period is vital for your business, as it gives you a clear picture of your future cash position. Think of it as your future cash flow calculation.

Step 8: Build contingency plans

• Incorporate contingency plans to mitigate unexpected events impacting cash flow, such as economic downturns or late payments.
• Create buffers in your projections to handle unforeseen circumstances.

Step 9: Implement rolling forecasts

• Embrace a rolling forecast approach, where you regularly update and refine your cash flow projections based on actual performance and changing circumstances.
• Rolling forecasts provide a dynamic view of your cash flow, allowing for adjustments and increased accuracy.

Cash Flow Projection Example

Let’s take a sneak peek into the cash flow projection of Pizza Planet, a hypothetical firm. In March, they began with an opening balance of $50,000. This snapshot will show us how their finances evolved during the next 4 months.

Here are 5 key takeaways from the above cash flow projection analysis for Pizza Planet:

Upsurge in Cash Flow from Receivables Collection (April):

• Successful efforts at collecting outstanding customer payments result in a significant increase in cash flow.
• Indicates effective accounts receivable management and timely collection processes.

Buffer Cash Addition (May and June):

• The company proactively adds buffer cash to prepare for potential financial disruptions.
• Demonstrates a prudent approach to financial planning and readiness for unexpected challenges.

Spike in Cash Outflow from Loan Payment (May):

• A noticeable cash outflow increase is attributed to the repayment of borrowed funds.
• It suggests a commitment to honoring loan obligations and maintaining a healthy financial standing.

Manageable Negative Net Cash Flow (May and June):

• A negative net cash flow during these months is offset by a positive net cash flow in other months.
• Indicates the ability to handle short-term cash fluctuations and maintain overall financial stability.

Consistent Closing Balance Growth:

• The closing balance exhibits a consistent and upward trend over the projection period.
• Reflects effective cash flow management, where inflows cover outflows and support the growth of the closing cash position.

Overall, the cash flow projection portrays a healthy cash flow for Pizza Planet, highlighting their ability to collect receivables, plan for contingencies, manage loan obligations, have resilience in managing short-term fluctuations, and steadily improve their cash position over time.

How to Calculate Projected Cash Flow?

To calculate projected cash flow, start by estimating incoming cash from sources like sales, investments, and financing. Then, deduct anticipated cash outflows such as operating expenses, loan payments, taxes, and capital expenditures. The resulting net cash flow clearly shows how much cash the business expects to generate or use within the forecasted period. 

Calculating projected cash flow is a crucial process for businesses to anticipate their future financial health and make informed decisions. This process involves forecasting expected cash inflows and outflows over a specific period using historical data, sales forecasts, expense projections, and other relevant information. Regularly updating and reviewing projected cash flow helps businesses identify potential cash shortages or surpluses, allowing for proactive cash management strategies and financial planning. 

Download our cash flow calculator to effortlessly track your company’s operating cash flow,

net cash flow (in/out), projected cash flow, and closing balance.

6 Common Pitfalls to Avoid When Creating Cash Flow Projections

At HighRadius, we recently turned our research engine toward cash flow forecasting to shed light on the sources of projection failures. One of our significant findings was that most companies opt for unrealistic projection models that don’t mirror the actual workings of their finance department.

Cash flow projections are only as strong as the numbers behind them. No one can be completely certain months in advance if they will encounter any unexpected events. Defining a realistic cash flow projection for your company is crucial to achieving more accurate results. Don’t let optimism cloud your key assumptions. Stick to the most likely numbers for your projections.

A 5% variance is acceptable, but exceeding this threshold warrants a closer look at your key assumptions. Identify any logical flaws that may compromise accuracy. Take note of these pitfall insights we’ve gathered from finance executives who have shared their experiences:

• Avoid overly generous sales forecasts that can undermine projection accuracy.
• Maintain a realistic approach to sales projections to ensure reliable cash flow projections.

Accounts Receivable: 

• Reflect the payment behaviour of your customers accurately in projections, especially if they tend to pay on the last possible day despite a 30-day payment schedule.
• Adjust the projection cycle to align with the actual payment patterns.
• Factor in annual and quarterly bills on the payables side of your projections.
• Consider potential changes in tax rates if your business is expected to reach a new tax level.
• Account for seasonal fluctuations and cyclical trends specific to your industry.
• Analyze historical data to identify patterns and adjust projections accordingly to reflect these variations.
• Incorporate contingencies in your projections to prepare for unforeseen circumstances such as economic downturns, natural disasters, or changes in market conditions.
• Build buffers to mitigate the impact of unexpected events on your cash flow.
• Failing to create multiple scenarios can leave you unprepared for different business outcomes.
• Develop projections for best-case, worst-case, and moderate scenarios to assess the impact of various circumstances on cash flow.

By addressing these pitfalls and adopting these best practices shared by finance executives, you can create more reliable and effective cash flow projections for your business. Stay proactive and keep your projections aligned with the realities of your industry and market conditions.

How Automation Helps in Projecting Cash Flow?

Building a cash flow projection chart is just the first step; the real power lies in the insights it can provide. Cash flow projection is crucial, but let’s face it – the traditional process is resource-consuming and hampers productivity. 

However, there’s a solution: a cash flow projection chart automation tool. 

Professionals in treasury understand this need for automation, but it requires an investment of time and money. Building a compelling business case is straightforward, especially for companies prioritizing cash reporting, forecasting, and leveraging the output for day-to-day cash management and investment planning.

Consider the following 3 business use cases shared by finance executives, highlighting the benefits of automated cash flow projections that far outweigh the initial investment:

Scalability and adaptability:

Forecasting cash flow in spreadsheets is manageable in the early stages, but as your business grows, it becomes challenging and resource-intensive. Manual cash flow management struggles to keep up with the increasing transactions and customer portfolios.

Many businesses rely on one-off solutions that only temporarily patch up cash flow processes without considering the implications for the future. Your business needs an automation tool that can effortlessly scale with your business, accommodating evolving needs.

Moreover, by opting for customization options, you can tailor the cash flow projections to your specific business requirements and adapt to changing market dynamics.

Time savings:

Consider a simple example of the time and effort involved in compiling a 13-week cash flow projection for stakeholders every week. The process typically includes:

• Capture cash flow data from banking and accounting platforms and classify transactions.
• Create short-term forecasts using payables and receivables data.
• Model budgets and other business plans for medium-term forecasts.
• Collect data from various business units, subsidiaries, and inventory levels.
• Consolidate the data into a single cash flow projection.
• Perform variance and sensitivity analysis.
• Compile reporting with commentary.

This process alone can consume many hours each week. Let’s assume it takes six hours for a single resource and another six hours for other contributors, totalling 12 hours per week or 624 hours per year. 

By implementing a cash flow projection automation tool, you can say goodbye to tedious manual tasks such as logging in, downloading data, updating spreadsheets, and compiling reports. Automating these processes saves your team countless hours, allowing them to focus on strategic initiatives and high-value activities.

Imagine the added time spent on data conversations, information requests, and follow-ups. Cash reporting can quickly become an ongoing, never-ending process.

By implementing a cash flow projection automation tool, you can say goodbye to tedious manual tasks such as logging in, downloading data, manipulating spreadsheets, and compiling reports. Automating these processes saves your team countless hours, allowing them to focus on strategic initiatives and high-value activities.

Accuracy and efficiency:

When it comes to cash flow monitoring and projection, accuracy is paramount for effective risk management. However, manual data handling introduces the risk of human error, which can have significant financial implications for businesses. These challenges are:

• Inaccurate financial decision-making
• Cash flow uncertainty
• Increased financial risks
• Impaired stakeholder confidence
• Wasted resources and time
• Compliance and reporting challenges
• Inconsistent data processing

Automating cash flow projections mitigates these risks by ensuring accurate and reliable results. An automation tool’s consistent data processing, real-time integration, error detection, and data validation capabilities instill greater accuracy, reliability, and confidence in the projected cash flow figures.

For example, Harris, a leading national mechanical contractor, transformed their cash flow management by adopting an automation tool. They achieved up to 85% accuracy across forecasts for 900+ projects and gained multiple 360-view projection horizons, from 1 day to 6 months, updated daily. This improvement in accuracy allowed the team to focus on higher-value tasks, driving better outcomes.

Cash Flow Projections with HighRadius

Managing cash flow projections today requires a host of tools to track data, usage, and historic revenue trends as seen above. Teams rely on spreadsheets, data warehouses, business intelligence tools, and analysts to compile and report the data.

Discover the power of HighRadius cash flow forecasting software , designed to precisely capture and analyze diverse scenarios, seamlessly integrating them into your cash forecasts. By visualizing the impact of these scenarios on your cash flows in real time, you gain a comprehensive understanding of potential outcomes and can proactively respond to changing circumstances.

Here’s how AI takes variance analysis to the next level and helps you generate accurate cash flow forecasts with low variance. It automates the collection of data on past cash flows, including bank statements, accounts receivable, accounts payable, and other financial transactions, and integrates with most financial systems. This data is analyzed to detect patterns and trends that can be used to anticipate future cash flows. Based on this historical analysis and regression analysis of complex cash flow categories such as A/R and A/P, AI selects an algorithm that can provide an accurate cash forecast.

When your forecast is off, you can miss opportunities to invest in growth or undermine your credibility and investor confidence. An accurate forecast means predictable growth and increased shareholder confidence. 

1. How do you prepare a projected cash flow statement?

Steps to prepare a projected cash flow statement:

• Analyze historical cash flows.
• Estimate future sales and collections from customers.
• Forecast expected payments to suppliers and vendors.
• Consider changes in operating, investing, and financing activities.
• Compile all these estimates into a projected cash flow statement for the desired period.

2. What is a projected cash flow budget?

A projected cash flow budget is a financial statement that estimates the amount of cash your business is expected to receive and pay out over a specific time period. This information can help your business have enough cash flow to maintain its regular operations during the given period.

3. What is a 3-year projected cash flow statement?

A 3-year projected cash flow statement forecasts cash inflows and outflows for the next three years. It helps businesses assess their expected cash position and plan for future financial needs and opportunities.

4. What are projected cash flow and fund flow statements?

A projected cash flow statement forecasts cash inflows and outflows over a period, aiding in budgeting and planning. The fund flow statement tracks the movement of funds between sources and uses, analyzing the financial position. Both provide insights into a company’s liquidity and financial health.

5. What are the four key uses of a cash flow forecast?

• Evaluate cash availability for operational expenses and investments.
• Identify potential cash flow gaps or surpluses.
• Support financial planning, budgeting, and decision-making.
• Assist in securing financing or negotiating favorable terms with stakeholders.

6. What is the cash flow projection ratio?

The term cash flow projection ratio is not a commonly used financial ratio. However, various ratios like operating cash flow ratio, cash flow margin, and cash flow coverage ratio are used to assess a company’s cash flow generation and management capabilities.

7. What is the formula for projected cash flow?

The projected cash flow formula is Projected Cash Flow = Projected Cash Inflows – Projected Cash Outflows . It calculates the anticipated net cash flow by subtracting projected expenses from projected revenues, considering all sources of inflows and outflows.

8. What are the advantages of cash flow projection?

Cash flow projection helps businesses:

• Anticipate future financial needs
• Manage cash shortages effectively
• Make informed decisions
• Ensure stability and growth
• Provide a roadmap for financial planning
• Stay proactive in managing finances

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How to Create a Cash Flow Forecast

10 min. read

Updated May 3, 2024

A good cash flow forecast might be the most important single piece of a business plan . All the strategy, tactics, and ongoing business activities mean nothing if there isn’t enough money to pay the bills.

That’s what a cash flow forecast is about—predicting your money needs in advance.

By cash, we mean money you can spend. Cash includes your checking account, savings, and liquid securities like money market funds. It is not just coins and bills.

Profits aren’t the same as cash

Profitable companies can run out of cash if they don’t know their numbers and manage their cash as well as their profits.

For example, your business can spend money that does not show up as an expense on your  profit and loss statement . Normal expenses reduce your profitability. But, certain spending, such as spending on inventory, debt repayment, and purchasing assets (new equipment, for example) reduces your cash but does not reduce your profitability. Because of this, your business can spend money and still be profitable.

On the sales side of things, your business can make a sale to a customer and send out an invoice, but not get paid right away. That sale adds to the revenue in your profit and loss statement but doesn’t show up in your bank account until the customer pays you.

That’s why a cash flow forecast is so important. It helps you predict how much money you’ll have in the bank at the end of every month, regardless of how profitable your business is.

Learn more about the differences between cash and profits .

• Two ways to create a cash flow forecast

There are several legitimate ways to do a cash flow forecast. The first method is called the “Direct Method” and the second is called the “Indirect Method.” Both methods are accurate and valid – you can choose the method that works best for you and is easiest for you to understand.

Unfortunately, experts can be annoying. Sometimes it seems like as soon as you use one method, somebody who is supposed to know business financials tells you you’ve done it wrong. Often that means that the expert doesn’t know enough to realize there is more than one way to do it.

• The direct method for forecasting cash flow

The direct method for forecasting cash flow is less popular than the indirect method but it can be much easier to use.

The reason it’s less popular is that it can’t be easily created using standard reports from your business’s accounting software. But, if you’re creating a forecast – looking forward into the future – you aren’t relying on reports from your accounting system so it may be a better choice for you.

That downside of choosing the direct method is that some bankers, accountants, and investors may prefer to see the indirect method of a cash flow forecast. Don’t worry, though, the direct method is just as accurate. After we explain the direct method, we’ll explain the indirect method as well.

The direct method of forecasting cash flow relies on this simple overall formula:

Cash Flow = Cash Received – Cash Spent

And here’s what that cash flow forecast actually looks like:

Let’s start by estimating your cash received and then we’ll move on to the other sections of the cash flow forecast.

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Forecasting cash received

You receive cash from three primary sources: 

1. Sales of your products and services

In your cash flow forecast, this is the “Cash from Operations” section. When you sell your products and services, some customers will pay you immediately in cash – that’s the “cash sales” row in your spreadsheet. You get that money right away and can deposit it in your bank account. You might also send invoices to customers and then have to collect payment. When you do that, you keep track of the money you are owed in  Accounts Receivable . When customers pay those invoices, that cash shows up on your cash flow forecast in the “Cash from Accounts Receivable” row. The easiest way to think about forecasting this row is to think about what invoices will be paid by your customers and when.

2. New loans and investments in your business

You can also receive cash by getting a new loan from a bank or an investment. When you receive this kind of cash, you’ll track it in the rows for loans and investments. It’s worth keeping these two different types of cash in-flows separate from each other, mostly because loans need to be repaid while investments do not need to be repaid.

3. Sales of assets

Assets are things that your business owns, such as vehicles, equipment, or property. When you sell an asset, you’ll usually receive cash from that sale and you track that cash in the “Sales of Assets” section of your cash flow forecast. For example, if you sell a truck that your company no longer needs, the proceeds from that sale would show up in your cash flow statement.

Forecasting cash spent

Similar to how you forecast the cash that you plan on receiving, you’ll forecast the cash that you plan on spending in a few categories:

1. Cash spending and paying your bills

You’ll want to forecast two types of cash spending related to your business’s operations: Cash Spending and Payment of Accounts Payable. Cash spending is money that you spend when you use petty cash or pay a bill immediately. But, there are also bills that you get and then pay later. You track these bills in  Accounts Payable . When you pay bills that you’ve been tracking in accounts payable, that cash payment will show up in your cash flow forecast as “payment of accounts payable”. When you’re forecasting this row, think about what bills you’ll pay and when you’ll pay them. In this section of your cash flow forecast, you exclude a few things: loan payments, asset purchases, dividends, and sales taxes. These will show up in the following sections.

2. Loan Payments

When you make loan repayments, you’ll forecast the repayment of the principal in your cash flow forecast. The interest on the loan is tracked in the “non-operating expense” that we’ll discuss below.

3. Purchasing Assets

Similar to how you track sales of assets, you’ll forecast asset purchases in your cash flow forecast. Asset purchases are purchases of long-lasting, tangible things. Typically, vehicles, equipment, buildings, and other things that you could potentially re-sell in the future. Inventory is an asset that your business might purchase if you keep inventory on hand.

4. Other non-operating expenses and sales tax

Your business may have other expenses that are considered “non-operating” expenses. These are expenses that are not associated with running your business, such as investments that your business may make and interest that you pay on loans. In addition, you’ll forecast when you make tax payments and include those cash outflows in this section. 

Forecasting cash flow and cash balance

In the direct cash flow forecasting method, calculating cash flow is simple. Just subtract the amount of cash you plan on spending in a month from the amount of cash you plan on receiving. This will be your “net cash flow”. If the number is positive, you receive more cash than you spend. If the number is negative, you will be spending more cash than you receive. You can predict your cash balance by adding your net cash flow to your cash balance.

• The indirect method

The indirect method of cash flow forecasting is as valid as the direct and reaches the same results.

Where the direct method looks at sources and uses of cash, the indirect method starts with net income and adds back items like depreciation that affect your profitability but don’t affect the cash balance.

The indirect method is more popular for creating cash flow statements about the past because you can easily get the data for the report from your accounting system.

You create the indirect cash flow statement by getting your Net Income (your profits) and then adding back in things that impact profit, but not cash. You also remove things like sales that have been booked, but not paid for yet.

Here’s what an indirect cash flow statement looks like:

There are five primary categories of adjustments that you’ll make to your profit number to figure out your actual cash flow:

1. Adjust for the change in accounts receivable

Not all of your sales arrive as cash immediately. In the indirect cash flow forecast, you need to adjust your net profit to account for the fact that some of your sales didn’t end up as cash in the bank but instead increased your accounts receivable.

2. Adjust for the change in accounts payable

Very similar to how you make an adjustment for accounts receivable, you’ll need to account for expenses that you may have booked on your income statement but not actually paid yet. You’ll need to add these expenses back because you still have that cash on hand and haven’t paid the bills yet.

3. Taxes & Depreciation

On your income statement, taxes and depreciation work to reduce your profitability. On the cash flow statement, you’ll need to add back in depreciation because that number doesn’t actually impact your cash. Taxes may have been calculated as an expense, but you may still have that money in your bank account. If that’s the case, you’ll need to add that back in as well to get an accurate forecast of your cash flow.

4. Loans and Investments

Similar to the direct method of cash flow, you’ll want to add in any additional cash you’ve received in the form of loans and investments. Make sure to also subtract any loan payments in this row.

5. Assets Purchased and Sold

If you bought or sold assets, you’ll need to add that into your cash flow calculations. This is, again, similar to the direct method of forecasting cash flow.

• Cash flow is about management

Remember: You should be able to project cash flow using competently educated guesses based on an understanding of the flow in your business of sales, sales on credit, receivables, inventory, and payables.

These are useful projections. But, real management is minding the projections every month with plan versus actual analysis so you can catch changes in time to manage them. 

A good cash flow forecast will show you exactly when cash might run low in the future so you can prepare. It’s always better to plan ahead so you can set up a line of credit or secure additional investment so your business can survive periods of negative cash flow.

• Cash Flow Forecasting Tools

Forecasting cash flow is unfortunately not a simple task to accomplish on your own. You can do it with spreadsheets, but the process can be complicated and it’s easy to make mistakes. 

Fortunately, there are affordable options that can make the process much easier – no spreadsheets or in-depth accounting knowledge required.

If you’re interested in checking out a cash flow forecasting tool, take a look at LivePlan for cash flow forecasting. It’s affordable and makes cash flow forecasting simple.

One of the key views in LivePlan is the cash flow assumptions view, as shown below, which highlights key cash flow assumptions in an interactive view that you can use to test the results of key assumptions:

With simple tools like this, you can explore different scenarios quickly to see how they will impact your future cash.

Tim Berry is the founder and chairman of Palo Alto Software , a co-founder of Borland International, and a recognized expert in business planning. He has an MBA from Stanford and degrees with honors from the University of Oregon and the University of Notre Dame. Today, Tim dedicates most of his time to blogging, teaching and evangelizing for business planning.

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• Profits aren’t the same as cash

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How to create a cash flow projection (and why you should)

For small business owners, managing cash flow (the money going into and out of your business) can be the difference between a thriving, successful company and filing for chapter 11 (aka bankruptcy).

In fact, one study showed that 30% of businesses fail because the owner runs out of money, and 60% of small business owners don’t feel knowledgeable about accounting or finance .

Understanding and predicting the flow of money in and out of your business, however, can help entrepreneurs make smarter decisions, plan ahead, and ultimately avoid an unnecessary cash flow crisis.

After all, knowing whether the next month will see a financial feast or famine can help you make better decisions about spending, saving, and investing in your business today.

One way to do this (without hiring a psychic)? Cash flow projection.

What is cash flow projection?

Cash flow projection is a breakdown of the money that is expected to come in and out of your business. This includes calculating your income and all of your expenses, which will give your business a clear idea on how much cash you'll be left with over a specific period of time.

If, for example, your cash flow projection suggests you’re going to have higher than normal costs and lower than normal earnings, it might not be the best time to buy that new piece of equipment.

On the other hand, if your cash flow projection suggests a surplus , it might be the right time to invest in the business.

Cash flow projections: The basics

In order to properly create a cash flow forecast, there are two concepts you should be aware of: accounts receivable (cash in) and accounts payable (cash out)

• Accounts Receivable: refers to the money the business is expecting to collect, such as customer payments and deposits, but it also includes government grants , rebates, and even bank loans and lines of credit .
• Accounts Payable: refers to the exact opposite—that is, anything the business will need to spend money on. That includes payroll , taxes, payments to suppliers and vendors, rent, overhead, inventory, as well as the owner’s compensation.

A cash flow projection (also referred to as a cash flow forecast) is essentially a breakdown of expected receivables versus payables. It ultimately provides an overview of how much cash the business is expected to have on hand at the end of each month .

Cash flow projections typically take less than an hour to produce but can go a long way in helping entrepreneurs identify and prepare for a potential shortfall, and make smarter choices when running their business.

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How to calculate your cash flow projection

Calculating your cash flow projection can seem intimidating at first, but once you start pulling together the necessary information, it isn’t so scary. Let’s walk through the first steps together.

1. Gather your documents

This includes data about your business’s income and expenses.

2. Find your opening balance

Your opening balance is the balance in your bank at the start of a period. (So, if you’ve just started your business, this is zero.)

Your closing balance is the amount in your bank at the end of the period.

So the opening balance in one month should equal the closing balance at the end of the previous month. But more on this later.

3. Receivables (money received/cash in) for next period

This is an estimate of your anticipated sales (such as invoices you expect to be paid, or payments made on credit), revenue, grants , or loans and investments.

4. Payables (money spent/cash out) for next period

Again, this is an estimate. You should consider things like materials, rent, taxes, utilities, insurance, bills, marketing, payroll, and any one-time or seasonal expenses.

“Seasonality can have a material effect on the cash flow of your business,” Andy Bailey, CEO of Petra Coach, wrote in an article for Forbes . “A good cash flow forecast will anticipate when cash outlays and cash receipts are higher or lower so you can better manage the working capital needs of the company.”

5. Calculate cash flow

Now, let’s bring it all together using this cash flow formula : Cash Flow = Estimated Cash In – Estimated Cash Out

6. Add cash flow to opening balance

Now, you’ll want to add your cash flow to your opening balance, which will provide you with your closing balance.

Put it all together: How a cash flow projections look on paper

In practical terms, a cash flow projection chart includes 12 months laid out across the top of a graph, and a column on the left-hand side with a list of both payables and receivables.

Here are all the categories you’ll need for your cash flow projection:

• Opening balance/operating cash
• Money received (cash sales, payments, loans, investments, etc.
• Money spent (expenses, materials, marketing, payroll and taxes, bills, loans, etc.)
• Totals for money received and money spent, respectively
• Total cash flow for the period
• Closing balance

This column typically begins with “operating cash”/opening balance or unused earnings from the previous month. For example, if your cash flow projection for January suggests a surplus of $5,000, your operating cash for February is also $5,000.

Below operating cash, list all expected accounts receivable sources—such as sales, loans, or grants—leaving a space at the bottom to add them all up.

Next, list all potential payable items—such as payroll, overhead, taxes, and inventory—with another space to add their total below.

Once you have your numbers prepared, simply subtract the total funds that are likely to be spent from the cash that is likely to be received to arrive at the month’s cash flow projection.

Once you’ve calculated your monthly cash flow, take the final number and list it at the top of the next month’s column under operating cash, and repeat the process until you’ve got a forecast for the next 12 months.

After the end of each month, be sure to update the projection accordingly, and add another month to the projection.

If you’re a Wave customer and you prefer to use a ready-made chart to help you create your projection, you can pull your financial data from the Reports section of Wave and feed it into this cash flow forecast template .

Be realistic with your cash flow forecast

Cash flow projections are only as strong as the numbers behind them, so it’s important to be as realistic as possible when putting yours together.

For example, being overly generous in your sales estimates can compromise the accuracy of the projection.

Furthermore, if you provide customers with a 30-day payment schedule and a majority pay on the last possible day, make sure that cycle is accurately reflected in your projection.

On the payables side of the equation, try to anticipate annual and quarterly bills and plan for an increased tax rate if the business is likely to reach a new tax level.

Those who pay their staff on a bi-weekly basis also need to keep an eye out for months with three payroll cycles, which typically occurs twice each year.

“Monthly or quarterly forecasts generally are more useful for stable, established businesses,” Bailey also wrote . “Weekly projections will be essential for companies scaling up or going through significant changes, such as a restructuring or merger/acquisition.”

“We like to encourage business owners—especially those who are starting out—to create a 13-week forecast for cash,” William Lieberman, the Managing Partner of The CEO’s Right Hand, told Forbes . “Each week, update the forecast based on what happened the previous week and extend the forecast window by one more week. In this way, you can keep a close watch on exactly what’s coming in and going out so you can be more proactive in addressing potential cash crunches.”

Those who want to be extra cautious with their projections can even include an “other expenses” category that designates a certain percentage of revenues for unanticipated costs. Putting aside some extra cash as a buffer is especially useful for those building their first projections, just in case they accidentally leave something out.

What now: Use your cash flow forecast to make data-driven decisions

Building the cash flow projection chart itself is an important exercise, but it’s only as useful as the insights you take away from it. Instead of hiding it away for the remainder of the month, consult your cash flow projection when making important financial decisions about your business.

If, for example, you anticipate a deficit in the months ahead, consider ways to cut your costs , increase sales, or save surpluses to help make up the difference. If you notice that payments often come in late, consider introducing a late penalty for bills past due.

You can also consult your cash flow projection to determine the best time to invest in new equipment, hire new staff, revise your pricing and payment terms, or when to offer promotions and discounts.

Have clients that regularly procrastinate on payments? Check out these tactics to get your clients to pay you faster .

Improving the accuracy of cash flow projections over time

Once you’re in the habit of creating cash flow projections, it becomes easier to improve their accuracy over time.

Comparing projections to actual results can help you improve the accuracy of your cash flow projections, and help identify longer-term patterns and cycles. Seasonal changes in revenue, patterns that contribute to late payments, and opportunities to cut costs will all become more apparent with each new cash flow projection.

While all these benefits won’t come all at once, entrepreneurs can use their cash flow projection to become better operators and better decision makers with each passing month.

Cash flow projection FAQs

How do cash flow projections affect business decisions, and how can small business owners improve their accuracy.

Cash flow projections play a key role in how you make business decisions by giving you important info on the movement of money in and out of your business You can up their accuracy by regularly updating projections, comparing them to actual results, and adjusting for any discrepancies. This helps you make smart choices about spending, saving, and investing in your business.

What industry-specific factors should small business owners consider in cash flow projections?

Small business owners need to consider various industry-specific factors when creating cash flow projections. For instance, seasonal changes in revenue, payment cycles, and market trends can significantly impact cash flow. By analyzing these factors, you can tailor your projections to better reflect the realities of your industry and adjust your strategies accordingly.

How can small business owners make sure their cash flow projections are reliable?

Small business owners often face challenges in making cash flow projections due to uncertainties in revenue, expenses, and market conditions. To ensure reliability, you should try to be realistic in your estimates, account for potential fluctuations, and regularly update your projections based on actual performance. Additionally, seeking advice from financial experts and using tools like cash flow forecasting templates can help with these challenges and improve the accuracy of projections over time.

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How to Create a Cash Flow Projection

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Being a business owner carries its share of risks and rewards. One of the more prominent risks is running low on cash. Luckily, managing your cash flow properly can help mitigate that risk.

That’s why cash flow projections are so important. Completing a cash flow projection for your business allows you to make more informed decisions. For example, if you expect your expenses to be higher in the next month, you can cut down on unnecessary expenditures. Likewise, if you know that cash flow is expected to be higher next month, you may want to purchase a new laptop to replace the aging one that you’ve been using.

This detailed cash flow projection provides detailed information on incoming cash and outgoing expenses. Image source: Author

In this article, we’ll explain a cash flow projection and its benefits and give you step-by-step instructions on how to create a cash flow projection for your business.

Overview: What is a cash flow projection?

A cash flow projection estimates the amount of cash that you expect to come into and flow out of your business. Also known as a cash flow forecast, a cash flow projection can be created for any period, with some small businesses even creating a weekly cash flow projection. Twelve-month projections are also fairly common, though they will need to be adjusted throughout the year as revenues and expenses change.

A properly prepared cash flow projection provides business owners with a view of all expected funds that will be coming in and going out of the business. Knowing your projected cash flow can provide a solid basis for making business decisions and lets you know if a potential cash shortfall is on the horizon.

There are numerous benefits to creating a cash flow projection, with little in the way of downsides. Even prep time is minimal, with a basic cash flow projection often taking less than an hour to prepare once you get the hang of it.

Many small business accounting software applications can prepare a basic cash flow statement, which can be helpful, but that only provides historic information and doesn’t cover expected cash flow for future periods.

If you’re still unconvinced on the merits of creating a cash flow projection, check out some of the benefits.

4 benefits of creating a cash flow projection

Creating a cash flow projection can help business owners better plan for the future and make more informed business decisions. Here are a few more reasons why creating a cash flow projection can benefit your business.

1. Improves decision-making

Creating a cash flow projection provides business owners and managers with the financial data they need to make more informed business decisions. These decisions can include reducing expenses when a cash shortfall is expected or investing more in the business when cash is expected to increase.

2. Helps control spending

Spending money is part of owning a business. But there’s an optimal time to spend money and a time when you should keep your expenses to a minimum. A cash flow projection done right can pinpoint both of those times.

3. Points out potential problem areas

Creating a cash flow projection can show you exactly how much cash is not flowing into your business. It can show you months or categories where expenses may be higher than you expected. Having this information available in an easy-to-understand format helps pinpoint potential trouble spots before they become an issue. A cash flow projection also serves as a good basis for calculating the cash coverage ratio, if you typically calculate cash ratios, and free cash flow totals for your business.

4. Predicts cash shortages

On some level, you may know that sales are down, but looking at that number on a spreadsheet makes it much more real. Many small businesses can be caught off guard by an unexpected cash shortage. While you may not be able to prevent the shortage, knowing that it’s coming can help you manage it better.

How to create a cash flow projection

Creating a cash flow projection is very simple; a projection for the upcoming month can be completed in less than an hour, though quarterly or yearly projections can take a little longer. Use cash flow assumptions, which are the total incoming and outgoing cash transactions you assume will occur, and follow the steps detailed below.

1. Bring your ending cash total forward

If you’re creating a cash flow projection for the first time, you’ll want to use your reconciled cash balance. If you’ve already created a cash flow projection for the previous month, your beginning balance for the upcoming month will be the ending cash balance from the previous month.

For example, after you reconcile your bank statement, your ending cash balance is $2,000. That will be placed at the top of the cash flow projection.

2. Estimate sales

Next, you’ll want to estimate sales that you expect to be paid in the upcoming month. For example, if you have $10,000 in invoices due the following month, and you expect 80% of those invoices will be paid, you’ll put $8,000 in income for sales paid.

3. Estimate other revenue

If your only revenue source is sales, you can move to the next step. But if you have other sources of revenue, such as rental income or interest income, you can place it below the sales revenue. For example, if you currently rent office space that brings in $1,000, you’ll place that amount under rental income, making your total incoming cash for the following month $9,000.

4. Estimate regular expenses

The next step is to estimate your regular expenses for the month. Be sure to include all of your regular expenses. In this example, your monthly expenses would include rent of $1,100, utilities that average $250 a month, a part-time employee, whose salary is $2,000 monthly, and insurance of $150 a month.

5. Estimate seasonal or one-time expenses

If you have a one-time expense upcoming, you can include it in a separate line item. Just be sure not to include that expense each month. For example, you have a subscription to a professional newsletter that you pay $90 for quarterly. You would only include that expense in the months when it’s paid.

6. Subtract expenses from income

After all cash in and cash out has been estimated, you can subtract your total expenses from your total income to see your cash flow for the month. This number is important since it displays whether you had more incoming cash than expenses.

7. Add beginning balance to estimated cash flow

Once you have your total cash flow for the month, you can add your beginning balance to your current cash flow to arrive at your ending cash balance for the month. This is the balance that you’ll use as your beginning cash balance for the following month.

A cash flow projection example

The basic cash flow projection example below shows your beginning cash balance each month, with the prior month’s ending balance carried over as the beginning balance the following month. On this statement, cash in is limited to sales, with cash out split into three categories. Once those totals are in place, you can come up with your cash flow total for the month, as well as your ending balance.

Cash flow projections can be summarized like the one below, or you can choose to make the cash flow projection as detailed as you would like.

A projected cash flow statement allows you to project both incoming revenues as well as planned expenses. Image source: Author

Though in some cases you may be able to create a projected cash flow statement like the one above in your accounting software application, you’ll want to use a spreadsheet to create a more detailed cash flow projection.

3 best practices when forecasting cash flow

Remember that a cash flow projection is just a projection, and things can change quickly. Your customer’s check may be eaten by your dog, a flaming meteor may put a hole in your roof, or your personal assistant might win the lottery and quit. But for the most part, you should be able to predict your cash flow fairly accurately by following these guidelines.

1. Be conservative

When estimating your operating cash flow, always be conservative. While we like to think that all of our customers will pay us on time, the reality is usually different. Your projections will likely be more accurate if you don’t assume that all outstanding invoices will be paid when they’re supposed to be paid.

2. Update regularly

If you only do a cash flow projection for the upcoming month, you won’t have to update much. But if you take on a quarterly or yearly projection, chances are that things will change during that time. You’ll add customers, lose customers, take on more employees, and add more monthly expenses, so be sure that those changes are added to your projection.

3. Include seasonal or variable expenses

Some industries are busier at certain times. If you’re in retail, chances are your busier months are November and December, while a gardening store will likely be busier in the spring. Make sure that those fluctuations are included in your projections.

Cash flow projections are important for all businesses

Whether you’re a sole proprietor offering IT services or a small manufacturer selling hockey pucks, a cash flow projection can help you better manage your business, plan for expected cash shortfalls, and eliminate unnecessary expenses when cash is low. Isn’t it time to use a cash flow projection in your business?

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Creating a cash flow projection

In less than an hour a month, you can identify potential cash shortfalls — and surpluses — in your business’s future.

Even businesses with healthy growth and strong sales run the risk of owing more than they can pay in a given month. Fortunately, spending less than an hour each month on a cash flow projection can help you identify potential cash shortfalls in the months ahead.

Before you create a cash flow projection for your business, it’s important to identify your key assumptions about how cash flows in and out of your business each month.

Identifying some key assumptions

For your cash flow projection, make assumptions in two key areas:

• Receivables: These assumptions should outline how quickly you receive payment from your customers. For example, if most of your customers pay you within 30 days, a key assumption could be: 90% of sales will be collected the month after the sale.
• Payables: These assumptions should outline when your payments are due. For example, if your vendors require payment within 2 weeks of delivery, a key assumption could be: Payables are due within 14 days of purchase.

Drafting your cash flow projection

With these realistic assumptions in hand, you can begin drafting your cash flow projection. To get started, create 12 columns across the top of a spreadsheet, representing the next 12 months. Then, in another column on the left-hand side, list the following cash flow categories and enter the appropriate amount in each column for each month (see descriptions below):

• Operating cash, beginning: The amount of money you’ll have at the beginning of each month.
• Sources of cash: All money coming in each month (receivable collections or direct sales, loans, etc.).
• Total sources of cash: Add the amounts in the “Operating cash, beginning” row to the amount in the “Sources of cash” for each month.
• Uses of cash: List every likely expense your business may incur, such as payroll, accounts payable to vendors, rent and loan payments, etc.
• Total uses of cash: Tally all your expenses so you can see exactly what will be going out the door each month.
• Excess (deficit) of cash: This is the number that counts. If you see positive numbers across the board, congratulations! You may have some extra dollars to invest back into your business. If you see a negative number for one of the months, don’t panic: You have time and options to prepare your business.

Sample cash flow projections

Here is an example of a cash flow projection that has been abbreviated to 4 months for the sake of simplicity:

XYZ Company, LLC Internal Cash Flow Projections August to November

Operating cash, beginning

Sources of cash

Uses of cash

*The company is projecting negative cash in November. What can you do today to prevent the negative cash flow?

Key assumptions :

• 75% of sales will be collected the month after the sale.
• 25% of sales will be collected the 2nd month after the sale.
• Payables are due in 25 days.
• 60% of eligible receivables can be used for the revolving line of credit.

Strategies to improve accuracy

As the months pass and you compare your monthly cash flow statements to your projections for each month, the numbers should match up. A 5% variance one way or the other can be okay, but if it starts being more than 5%, you should revisit your key assumptions to check for flaws in your logic. Even if your actual numbers come in higher than your projections, you should take a close look at your assumptions, because higher returns in the short term could lead to shortfalls later on. Keep in mind that lenders often use your cash flow and liquidity ratio to assess a company’s financial health.

To make sure your projection stays accurate throughout the year, be sure to consider these variable expenses.

• Months with three payrolls
• Months when insurance premiums are due
• Increased estimated taxes due to increased sales

Continue to refine your projection

To keep your cash flow projections on track, create a rolling 12-month plan that you update at the end of each month. If you add a new month to the end every time a month is completed, you’ll always have a long-term grasp of your business’s financial health.

However, don’t try to project more than 12 months into the future. It can be time consuming and variables can change. Prime rates could go up, for example.

Once you’ve gotten into the habit of using a cash flow projection, it should give you added control over your cash flow and a clearer picture of your company’s financial health. For additional support, make an appointment to talk to a banker.

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Cash Flow Forecasting: A How-To Guide (With Templates)

Janet Berry-Johnson, CPA

Reviewed by

May 30, 2023

This article is Tax Professional approved

Most small business owners just want their accounting done so they can focus on doing what they love. But tracking and forecasting cash flow—despite the time and effort required—is essential for starting, operating, and expanding a business.

I am the text that will be copied.

In 2018, CB Insights analyzed 101 failed startups and found that running out of cash was the second most common cause of failure, impacting 29% of businesses.

To avoid that fate, you need a cash flow forecast to help you estimate how much your cash outflows and inflows will affect your business.

What is a cash flow forecast?

A cash flow forecast (also known as a cash flow projection) is like a budget, but rather than estimating revenues and expenses, it estimates cash coming in and going out based on past business performance.

It’s not uncommon for a business to experience a cash shortage, even when sales are good. This usually happens when customers are allowed to pay after the product or service is delivered. In cases like these, a business owner must plan how they will cover costs before receiving the payment.

For example, say Hana Enterprises ships $50,000 worth of security products to customers in January, along with invoices that are due in 30 days. The company will have $50,000 of revenues for the month but won’t receive any cash until February. On paper, the business looks healthy, but all of its sales are tied up in the accounts receivable. Unless Hana Enterprises has plenty of cash on hand at the beginning of the month, they will have trouble covering their expenditures until they start receiving cash from clients.

With a cash flow forecast, you ignore sales on credit, accounts payable, and accrued expenses, instead focusing on the revenue you actually expect to collect and the expenses you actually expect to pay during a given period. You can also use the information provided on past cash flow statements to estimate your expenses for the period you’re forecasting for.

( If you just want to dive into cash flow forecasting, check out our free cash flow forecast template . )

The benefits of cash forecasting

Cash forecasting may sound like something boring that accountants do in big companies. Not so! It’s absolutely essential for every single business. Here’s why:

• It helps you identify potential problems. Cash forecasting can help you predict the months in which you’re likely to experience a cash deficit and make necessary changes, like changing your pricing or adjusting your business plan.
• It decreases the impact of cash shortages. When you can predict months in which you might experience a cash shortage, you can take steps to plan for them. You might save more in months where you have a surplus, step up your receivables collection efforts, or establish a line of credit with your bank to guarantee enough working capital to last the period.
• It keeps suppliers and employees happy. Late payments and missing paychecks damage your reputation with suppliers and employees. When you can predict how much money you’ll have on hand in any given month, you can confirm that you’ll be able to meet your payroll obligations and pay suppliers by the due date.

Free cash flow forecast template

To make this a lot easier, we’ve created a business cash flow forecast template for Excel that you can start using right now.

Access Template

The template has three essential pieces:

• Beginning cash balance. This is the actual cash you expect to have on hand at the beginning of the month. It should include bank accounts, PayPal, Venmo, anything you use that’s currently holding just business funds. This information can be found on your balance sheet .
• Sources of cash. These are all of your cash inflows each month. It can include cash sales, receivables collections, repayments from money you’ve loaned out, etc.
• Uses of cash. This is every expense your business may incur, including payroll, payments to vendors, utilities, rent, loan payments, etc.

Here’s an example of a completed cash flow projection for a three month period:

Hana Enterprises, Inc.

Cash Flow Projection

January to March 2022

As you can see from the example above, Hana Enterprises expects to have a cash shortage in March. This results from a negative net cash flow (when more cash goes out than comes in). Knowing that information ahead of time, the company can take steps to prevent the shortage from occurring.

Hana Enterprises has several options to avoid this shortage in March. They might secure a line of credit from the bank, purchase fewer computers in February, negotiate longer payment terms from vendors, contact late-paying customers to speed up the collection of receivables, or take other cost-cutting measures to reduce their overhead expenses.

When you’re ready to get started, download your copy of the cash flow forecasting sheet here .

How Bench can help

Use Bench’s simple, intuitive platform to get all the information you need to project your cash flow. Each month, your transactions are automatically imported into our platform then categorized and reviewed by your bookkeeper. Bench helps you stay on top of your business’s top expenses so you can make informed budgeting decisions on the fly. Explore our platform with a free demo .

Tips for improving your cash flow spreadsheet

Keep in mind: a cash flow forecast isn’t something you create once a year and never look at again. It’s a living, breathing business tool you should review and update on a monthly basis.

Though projections are helpful, they can’t perfectly predict the future. As the months pass, you should expect to see that your projections aren’t quite matching up with your actual results. That means it’s time to re-run your forecast to take into account these differences.

To improve the accuracy of your cash flow worksheet, consider the following:

• Account for extra pay periods. If you pay employees bi-weekly, make sure your projection takes into account any months with three payrolls.
• Remember annual payments. If certain insurance policies, subscriptions, or other expenses are paid annually rather than monthly, be sure to include them in your spreadsheet.
• Remember estimated tax payments. For most calendar-year businesses, estimated tax payments are due on April 15th, June 15th, September 15th, and January 15th.
• Don’t forget about savings. Try to allocate a portion of any cash surpluses to save for lean months.
• Identify seasonal fluctuations. If you’re expecting a period of time with lower sales, make sure your forecast reflects this so you can have enough cash on hand to ramp up when business picks up again.
• Don’t forecast too far out. Creating a rolling 12-month cash flow forecast that you update at the end of each month can help you identify issues before your business faces financial troubles, but don’t try to forecast more than 12 months out. The longer the reporting period you want to forecast, the more likely you’ll end up spending a lot of time creating a cash flow projection that doesn’t provide any useful information.

Your cash flow forecast is key to good cash flow management . Try to account for all cash sources and uses in your projection and maintain an emergency fund or backup plan to ensure you don’t get sidelined by slow-paying customers or unexpected expenses. When you do, this simple but valuable tool can help you keep an eye on cash and ensure you don’t compromise growth or put your business in jeopardy.

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A Comprehensive Guide to Crafting Cash flow Projections

Cash flow projections are key elements in business planning and forecasting, helping companies to understand their future cash inflows and outflows. By creating a comprehensive cashflow projection model, businesses can identify potential cash shortages and surpluses, and make informed decisions about budgeting, investing, and financing.

What is cash flow projection?

Cash flow projection is a vital financial tool utilized by businesses and individuals alike to forecast the inflow and outflow of cash over a specified period. This projection provides a comprehensive overview of anticipated revenue and expenses, allowing individuals, entrepreneurs, and top asset management firms to make informed decisions regarding their financial strategies.

In essence, cash flow projection serves as a roadmap for financial stability and success, enabling businesses and top asset management firms to navigate economic uncertainties with confidence. By staying attuned to cash flow trends and patterns, individuals and organizations can ensure a secure and prosperous financial future.

Advantages of Projecting Cash Flow

• Better Financial Planning: Cash flow projections help individuals and businesses plan their finances more effectively by forecasting future revenue and expenses.
• Liquidity Management: Accurate cash flow projections allow organizations to manage their liquidity needs, ensuring they have enough funds for day-to-day operations and investments.
• Decision Making: Cash flow projections serve as a valuable tool for making informed decisions about investments, expenses, and expansion plans.
• Identifying Shortfalls and Surpluses: Projecting cash flow helps anticipate periods of cash surplus or shortfall, allowing timely adjustments to maintain financial stability.
• Risk Management: By foreseeing potential cash flow issues, companies can develop strategies to mitigate financial risks and uncertainties.
• Enhancing Investor Confidence: Accurate cash flow projections build confidence among investors and stakeholders, demonstrating sound financial management.
• Setting Realistic Goals: Cash flow projections assist in setting achievable financial goals and measuring progress towards them.
• Negotiation Power: Having clear insights into cash flow can strengthen negotiating positions with suppliers, lenders, and investors.
• Operational Efficiency: Analyzing cash flow projections helps identify inefficiencies in revenue collection and payment processes, improving overall cash flow management.
• Building Resilience: Cash flow projections enable businesses to plan for contingencies and build resilience against economic fluctuations and unforeseen events.

Step-by-Step Guide to Cashflow Projection Model for Your Business

Step 1: gather historical data.

The first step in building a comprehensive cash flow projection model is to gather historical data on your business’s cash inflows and outflows. This information can be obtained from your company’s financial statements and bank records and should cover a period of at least 12 months.

By analyzing this data, you can identify trends and patterns in your cash flow, such as seasonal fluctuations and cyclical trends. This will help you to create a more accurate cash flow projection model that reflects the unique characteristics of your business.

Step 2: Identify Key Drivers

The next step is to identify the key drivers of your cash inflows and outflows. These drivers will vary depending on the nature of your business but may include factors such as sales volume, pricing, payment terms, and inventory levels.

By understanding the key drivers of your cash flow, you can create a more accurate cash flow projection model that reflects the underlying dynamics of your business.

Step 3: Forecast Future Cash Inflows

Using the historical data and key drivers identified in steps 1 and 2, you can begin to forecast your future cash inflows. This should take into account factors such as anticipated sales volume, pricing, and payment terms.

When forecasting future cash inflows, it is important to be realistic and conservative in your estimates. This will help to ensure that your cash flow projection model is accurate and reliable.

Step 4: Forecast Future Cash Outflows

The next step is to forecast your future cash outflows. This should take into account all of the expenses and costs associated with running your business, including salaries, rent, utilities, inventory, and taxes.

When forecasting future cash outflows, it is important to be thorough and comprehensive in your estimates. This will help to ensure that you have a complete understanding of your business’s cash needs and can plan accordingly.

Step 5: Create a Cashflow Projection Model

Using the forecasts of future cash inflows and outflows, you can create a comprehensive cashflow projection model. This model should include a detailed breakdown of your expected cash inflows and outflows on a monthly or quarterly basis.

Your cash flow projection model should also include a cash balance forecast, which shows your projected cash balance at the end of each month or quarter. This will help you to identify potential cash shortages and surpluses and make informed decisions about budgeting, investing, and financing.

Step 6: Review and Update Regularly

Once you have created a cash flow projection model, it is important to review and update it regularly. This will help you to identify any changes in your business that may impact your cash flow and adjust as necessary.

In addition, regular review and updating of your cash flow projection model will help you to identify potential cash shortages or surpluses well in advance, giving you time to take corrective action before they occur.

Building a comprehensive cash flow projection model is a key element in business planning and forecasting. By following the steps outlined in this blog, you can create an accurate and reliable cash flow projection model that reflects the unique dynamics of your business. Regular review and updating of your cashflow projection model will help you to identify potential cash shortages or surpluses and make informed decisions about budgeting, investing, and financing.

Password Policy

• Passwords should consist of a minimum of EIGHT characters to a maximum of THIRTY characters.
• Password complexity should be a combination of alphanumerical, at least one upper case, at least one lower case character, and at least one special character.
• Password should contain at least one numerical value (e.g. 0-9)
• Password should contain at least one each of upper and lower case characters (e.g., az, A-Z)
• Password should contain at least one special character (e.g. !@#$%^&*()+=)
• The system should not allow reusing the last 3 passwords.
• The system should not allow using the user’s first and or last name used in the system.
• The system should not allow using a username, email id, or phone no. used in the system.
• Password should not be allowed to contain a sequence of repeated characters e.g. aaa123 is an invalid password

Asset Vantage Software Licensing Agreement

This is a binding legal agreement between the natural person or legal person (“ Licensee ” or “ you ”) agreeing to these terms of service (“ Agreement ”) and Asset Vantage Inc. (“ Company ” “ us ,” or “ we ”). This Agreement along with any other terms and policies referenced herein, and are incorporated herein by reference form an integral part hereof, as amended from time to time and constitute a legally binding agreement as of the Effective Date (as defined below). This Agreement is between the Company and you, either individually, or on behalf of your employer or any other entity which you represent (“you” or “your”). In case you represent your employer or another entity, you hereby represent that (i) you have full legal authority to bind your employer or such entity (as applicable) to this Agreement; and (ii) after reading and understanding this Agreement, you agree to the terms of this Agreement on behalf of your employer or the respective entity (as applicable), and this Agreement shall bind your employer or such entity (as the case may be). Please note that you are deemed as an Authorized User ( defined below ) representative of your employer or an entity (as applicable) if you are using your employer or an entity’s email address in registering into the service.

You acknowledge that this Agreement is binding, and you affirm and signify your consent to this Agreement, by either: (i) clicking on a button or checking a checkbox for the acceptance of this Agreement; or (ii) subscribing/registering for using or accessing the service, sites or any of our mobile application, whichever is earlier (the “ Effective Date ”).

If you do not agree to comply with, and be bound by, this Agreement or do not have authority to bind your employer or any other entity (as applicable), please do not accept the terms under this Agreement or access or use the service or the sites or any of our mobile application.

1. Definitions:  For purposes of this Agreement, the following terms have the following meanings:

“Authorized Users”  means the individual persons who are officers, employees or advisors to the Licensee (or who are Families or CPAs to Families) expressly authorized to use the Software by the Licensee pursuant to the license granted under this Agreement, provided that a User License may be reassigned from time to time by Licensee to a new Authorized User who is replacing a former Authorized User who is no longer permitted to use the Software.

“ Confidential Information ” Confidential Information shall include, but not be limited to:

• any information provided by one Party to the other Party, or developed by one Party for the other Party within the framework of this Agreement, including credentials supplied by the Company to the Licensee to access the Software Platform;
• all improvements, research, data, materials, products, technology, specifications, manuals, plans, samples, procedures, know-how, concepts, teaching or development techniques, intellectual property, pricing methods, formulas, other information not generally known outside of the Party and its affiliates, and other ideas related to the Party whether existing tangibly or intangibly in oral, written, electronic or other forms;
• data collected during any sales effort;
• names, identifying information, or other information regarding a Party’s customers, employees, independent contractors or other associates;
• information generated or obtained in connection with the Parties’ pricing, proposals or contracts (including the provisions of this Agreement);
• the Parties’ procedures, programs, guidelines or policies;
• information designated in writing as “confidential”;
• anything that any court or law of any jurisdiction governing the objects of this clause deems confidential or privileged, or
• anything that, upon disclosure, could be detrimental to the interests of a Party or any of a Party’s clients, members, or employees, whether or not the Company identifies the information as confidential or privileged. Each Party acknowledges that the Confidential Information of the other Party constitutes valuable confidential and proprietary information.

However, neither Party’s Confidential Information shall include any information that:

• was known by the receiving Party at the time of disclosure to it by the disclosing Party, or that is independently developed or discovered by the receiving Party, after disclosure by the disclosing party, without the aid, application or use of any item of the disclosing Party’s Confidential Information, as evidenced by written records;
• is now or subsequently becomes, through no act or failure to act on the part of the receiving Party, generally known or available;
• is disclosed to the receiving Party by a third party authorized to disclose it; or
• is required by law or by court or administrative order to be disclosed; provided, that the receiving Party shall have first given prompt notice to the other Party of such required disclosure.

“Documentation” means user manuals, technical manuals and any other materials made available by Company, in electronic or other form, that describe the operation, use or technical specifications of the Software.

“Intellectual Property Rights” means any and all registered and unregistered rights granted, applied for or otherwise now or hereafter in existence under or related to any patent, copyright, trademark, trade secret, database protection or other intellectual property rights laws, and all similar or equivalent rights or forms of protection, in any part of the world.

“Person”  means an individual, corporation, partnership, joint venture, limited liability company, governmental authority, unincorporated organization, trust, association or other entity.

“Software” means platform procured by the Licensee as software as a service (SaaS) and all modifications thereto from the Company. This includes any technical documentation, instructions, etc., regarding the software. The software also includes a series of instructions, rules, routines, or statements that allow or cause the software to perform a specific operation or series of operations, the recorded information comprising viewing design details, algorithms, processes, flow charts, formulas, related material that would enable the computer program to be produced or created, graphical interface, images, design materials, and scheme design.

“Term”  has the meaning set forth in Clause 11 of this Agreement.

“Third Party”  means any Person other than Licensee or Company.

• Scope and Grant of License .
• Subject to Licensee’s compliance with all terms and conditions set forth in this Agreement and regular payment of the License Fee, the Company hereby grants to the Licensee a non-exclusive, non-transferable, non-sub-licensable and revocable limited license during the Term to use, solely by and through its Authorized Users, the Software along with the Documentation (“ Software Platform ”), solely as set forth in this Clause 3. This license grants Licensee the right, to use and access the Software Platform in accordance with this Agreement which more particularly set out in Appendix III (“ Scope ”) and the Documentation. By entering into this Agreement, the Licensee agrees to be legally bound by its terms and conditions.
• The Licensee acknowledges and agrees that pursuant to the license, the Licensee shall not acquire any ownership interest in the Software Platform or any other rights thereto other than to use the Software Platform in accordance with the license granted, and subject to all terms, conditions, and restrictions, under this Agreement. Further, the Licensee acknowledges and agrees that the Company has only granted the Licensee the license to use the Software Platform as per the terms of this Agreement and the Software Platform is not being sold to the Licensee.
• License Fee . Licensee agrees to pay for the Software Platform a [monthly/annual] fee as set out in the Appendix I (“ License Fee ”) for the Term.
• Use Restrictions.
• Licensee shall not, and shall ensure its Authorized Users do not, either directly or indirectly:
• provide any other Person, other than Authorized Users, with access to or use of the Software Platform;
• modify, amend, translate, adapt or otherwise create derivative works or improvements, whether or not patentable, of the Software Platform or any part thereof;
• combine the Software or any part thereof with, or incorporate the Software or any part thereof in, any other programs;
• reverse engineer, disassemble, decompile, decode, modify, amend or otherwise attempt to derive or gain access to the source code of the Software or any part thereof;
• remove, delete, alter or obscure any trademarks or any copyright, trademark, patent or other intellectual property or proprietary rights notices provided on or with the Software Platform, including any copy thereof;
• rent, lease, lend, sell, sublicense, assign, distribute, publish, transfer or otherwise make available the Software Platform, or any features or functionality of the Software Platform, to any Third Party (other than Authorized Users) for any reason;
• use the Software Platform in violation of any law, regulation or rule;
• use the Software Platform for purposes of developing or assisting a third party in developing a competing software or platform, product or service or any other purpose that is to the Company’s commercial disadvantage.
• use the Software for purposes of competitive analysis or the development of a competing software product or service or product having the same and/or similar function as the Software Platform.
• This Agreement does not grant the Licensee any rights whatsoever in relation to the Company’s trademarks or service marks; and
• The Licensee shall not use the Software Platform into any country in violation of any export control laws or regulations.
• Responsibility for Use of Software .
• The Licensee is responsible and liable for all uses of the Software Platform through access thereto provided by Licensee, directly or indirectly. Specifically, and without limiting the generality of the foregoing, the Licensee shall at all times be responsible and liable for all actions and omissions of the Authorised Users. If the Company at any time determines that the Licensee’s use of the Software is in excess of the Scope then:

a. The Licensee shall, within thirty (30) days following the date of Company’s written notification thereof, pay to Company the additional License Fees for such excess use. In determining the License Fee payable pursuant to the foregoing, unless Licensee can demonstrate otherwise by documentary evidence, all previously unknown excess use of the Software shall be deemed to have commenced on the commencement date of this Agreement and the rates for such licenses shall be determined without regard to any discount to which the Licensee may have been entitled had such use been properly licensed prior to its commencement (or deemed commencement); and

b. The Company reserves the right to forthwith terminate this Agreement and initiate the legal proceedings against the Licensee for breach of terms of this Agreement and recovery of the amounts due.

• The Licensee shall use commercially reasonable efforts to safeguard the Software Platform from infringement, replication in any form, misappropriation, theft, misuse, or unauthorized access. Licensee shall promptly notify the Company if Licensee becomes aware of any violation of Company’s Intellectual Property Rights in the Software Platform.
• Support Services .
• Subject to Clause 8.1, during the Term of this Agreement, the Company may provide basic software support services described in the pricing proposal as set out in Appendix I.
• The Company shall have a right to stop providing support services if the Licensee and/or any of it Authorised Users:
• breach any of the terms of this Agreement; or
• use the Software Platform in excess or not in accordance with the Scope
• The Company may provide updates and maintenance on the Software at its sole discretion.
• Collection and Use of Information .
• Licensee acknowledges that Company may, directly or indirectly through the services of Third Parties, collect and store information regarding use of the Software and about equipment on which the Software is used or through which it otherwise is accessed and used, through the provision of support services.
• Licensee agrees that the Company may use such information for any purpose related to any use of the Software by Licensee or on Licensee’s equipment, including but not limited to:
• improving the performance of the Software; and
• verifying Licensee’s compliance with the terms of this Agreement and enforcing the Company’s rights, including all Intellectual Property Rights in and to the Software.
• Confidential Information .
• In connection with the performance of the Parties’ obligations under this Agreement, each Party may provide to the other Party, and the other Party shall have access to, the first Party’s Confidential Information. Notwithstanding any other content of this Clause 9, Licensee hereby permits the Company to use the Licensee’s name in the Company’s marketing material to the limited extent of identifying the Licensee as a customer that uses the Software Platform.
• Each Party shall exercise due care to prevent the unauthorized use or disclosure of the other Party’s Confidential Information, and shall not, without the other Party’s prior written consent: (a) use the other Party’s Confidential Information for any purpose other than performing its obligations under this Agreement; or (b) disclose or otherwise make available, directly or indirectly, any item of the other Party’s Confidential Information to any person or entity other than those employees, independent contractors, agents or investigators of such Party and/or its affiliated entities (collectively, “ Representatives “) who reasonably need to know the same in the performance of such Party’s obligations under this Agreement, or in order to make decisions or render advice in connection therewith. Each party shall protect the confidentiality of the Confidential Information of the other party with the same degree of care, as such party uses to protect its own Confidential Information, and in no event, less than reasonable care. For the convenience of the Parties, each Party acknowledges that unless precluded in writing by the other Party, Confidential Information may be transmitted to a Party and/or its Representatives via the Internet.
• In the event of an actual or threatened breach of the above confidentiality provisions, the non-breaching Party shall have no adequate remedy at law and shall be entitled to immediate injunctive and other equitable relief, without bond and without the necessity of showing actual money damages.
• Intellectual Property Rights .

Licensee acknowledges and agrees that the Software Platform is provided by the Company under a non-exclusive, non-transferable, non-sub-licensable, revocable license. The Licensee shall not have any interest in the Software Platform including but not limited to any ownership interest in the Software Platform or any other rights thereto other than to use the same in accordance with the terms of this Agreement. The Company reserves and retains its entire right, title and interest in the Software Platform and all Intellectual Property Rights arising out of or relating to the Software Platform. The Licensee shall use all efforts to safeguard the Software Platform from infringement, misappropriation, theft, misuse or unauthorized access. The Licensee shall promptly notify the Company if the Licensee becomes aware of any violation of the Company’s Intellectual Property Rights in the Software Platform and fully cooperate with the Company in any legal action taken by Company to enforce its Intellectual Property Rights. The Licensee acknowledges and agrees that the Licensee, and not the Company, shall be solely responsible for the investigation, defense, settlement and discharge of any intellectual property infringement claim or suit, or any other harm or damages resulting from Licensee’s use of or access to the Software Platform.

• Term and Termination .
• This Agreement and the license granted hereunder shall remain in effect for the term set forth in the order form as set out in Appendix I. The license is valid for a period of 12 months from the date of activation (“Term”) unless otherwise indicated in the order form as set out in Appendix I. This Agreement will renew automatically for another twelve month period at the expiration date (“ Extended Term ”) unless the Licensee provides a written notice of termination sixty (60) days prior to the date of expiry of the License.
• Without prejudice to any other rights or remedies and notwithstanding anything contained in Clause 11.1 above, the Company shall have an unfettered right to terminate this Agreement at any time upon Licensee’s failure to comply with all the terms and conditions of this Agreement.
• Company may terminate this Agreement, effective immediately, if the Licensee files itself, or any other Person has filed against the Licensee (and fails to obtain a dismissal within sixty (60) days thereof), a petition for voluntary or involuntary bankruptcy or pursuant to any other insolvency law, makes or seeks to make a general assignment for the benefit of its creditors or applies for, or consents to, the appointment of a trustee, receiver or custodian for a substantial part of its property.
• Upon expiration or earlier termination of this Agreement, the license granted hereunder shall also terminate, and Licensee shall cease using and destroy (to the extent reasonably practicable) all copies of the Software Platform. No expiration or termination shall affect Licensee’s obligation to pay all Licensee Fees that may have become due before such expiration or termination, or entitle Licensee to any refund, in each case except as set forth in Clause 11.3.
• Limited Warranties, Exclusive Remedy and Disclaimer/Warranty Disclaimer .
• The Company warrants that, during the Term, the Software will substantially contain the functionality described in the Documentation, and when properly accessed and used on a computer (as per requirements specified in the Documentation) and operated in accordance with the Documentation the Software shall substantially perform in accordance therewith. However, the Company does not represent or warrant that any and/or all errors will be corrected and that any and/or all incidents will be prevented or corrected.
• The warranties expressly set forth in this Clause will not apply and will become null and void (i) if Licensee breaches any provision of this Agreement, and/or (ii) if Licensee and/or any Authorized User and/or any other Person to whom access to the Software is provided , whether or not in violation of this Agreement:
• uses the Software Platform on or in connection with any hardware or software not specified in the Documentation, provided that the warranties in this Section shall continue to apply to Software that is installed or used on any hardware, software, configuration or operating system in accordance with the Documentation; or
• misuses the Software, including any use of the Software other than as specified in the Documentation.
• During the Term of this Agreement, if the Software fails to perform substantially in accordance with the Documentation, and such failure is not excluded from warranty pursuant to Clause 12.1, the Company will, at its sole option, use commercially reasonable efforts to repair the Software, provided that Licensee provides Company with all information which the Company requests to resolve the reported failure, including sufficient information to enable the Company to recreate such failure. Provided further that, the Licensee shall within 5 days after such failure has occurred, notify in writing to the Company informing about the failure. The Licensee acknowledges and agrees that the Software Platform may produce inaccurate results because of a failure or fault within the Software Platform for reasons not attributable to the Company or failure by Licensee to properly use and/or deploy the Software Platform. The Licensee assumes full and sole responsibility for any use of the Software Platform and bears the entire risk for failures or faults within the Software Platform on account of reasons not attributable to the Company. Licensee agrees that regardless of the cause of failure or fault or the form of any claim, the Company’s obligation if any shall be governed by this Agreement. Further, the Licensee acknowledges that the remedies set forth in this Clause 12.3 are Licensee’s sole remedies and Company’s sole liability with respect to the warranties provided in this Clause 12.
• The software and documentation are provided to licensee on an “as is where is” basis and with all faults and defects without warranty of any kind other than as expressly set forth in this Clause 12. The Company, on its own behalf and on behalf of its affiliates expressly disclaims all warranties, whether express, implied, statutory or otherwise, with respect to the software and documentation, including all implied warranties of merchantability, fitness for a particular purpose, and warranties that may arise out of course of dealing, course of performance, usage or trade practice. Without limitation to the foregoing, the Company provides no warranty or undertaking, and makes no representation of any kind that the licensed Software Platform will meet the Licensee’s requirements, achieve any intended results, operate without interruption, meet any performance or reliability standards or be error free or that any errors or defects can or will be corrected.
• The Licensee represents and warrants that it has due authorisations to enter into this Agreement and perform its obligations. Further, the Licensee represents and warrants that its is not barred under law, contractually or otherwise to enter into this Agreement and perform its obligations.
• Limitation of liability
• The Company and its affiliates, shall not be liable to the Licensee or to any third party for any use, interruption, delay or inability to use the software, lost revenues or profits, delays, interruption or loss of services, business or goodwill, loss or corruption of data, loss resulting from system or system service failure, malfunction or shutdown, failure to accurately transfer, read or transmit information, failure to update or provide correct information, system incompatibility or provision of incorrect compatibility information, or breaches in system security, or for any consequential, incidental, indirect, exemplary, special or punitive damages, whether arising out of or in connection with this agreement, breach of contract, tort (including negligence) or otherwise, regardless of whether such damages were foreseeable and whether or not the Licensee was advised of the possibility of such damages.
• In no event will the Company’s and its affiliates’, collective aggregate liability under or in connection with this Agreement or its subject matter, under any legal or equitable theory, including breach of contract, tort (including negligence), strict liability and otherwise, exceed the total amount paid to the Company under this agreement for immediately preceding three month period.
• Export Regulation.

The Software Platform may be subject to US export control laws, including the US Export Administration Act and its associated regulations. The Licensee shall not, directly or indirectly, export, re-export or release the Software Platform to, or make the Software Platform accessible from, any jurisdiction or country to which export, re-export or release is prohibited by law, rule or regulation. The Licensee shall comply with all applicable federal laws, regulations and rules, and complete all required undertakings (including obtaining any necessary export license or other governmental approval), prior to exporting, re-exporting, releasing or otherwise making the Software Platform available outside the US.

• Indemnification

Licensee hereby agrees to indemnify the Company and its officers, directors, employees, agents, and representatives (“ Indemnified Person ”) from each and every demand, claim, loss, liability, or damage of any kind, including actual attorney’s/legal fees, whether in tort or contract, that may incur by reason of, or arising out of, any claim which is made by either the Licensee and/or any third party against the Indemnified Person with respect to any breach or violation of this Agreement by the Licensee or any claims based on Licensee’s and/or its client’s use of the Software Platform.

• Miscellaneous .
• Governing Law : This Agreement is governed by and construed in accordance with the internal laws of United States of America without giving effect to any choice or conflict of law provision or rule that would require or permit the application of the laws of any other jurisdiction. Any disputes arising from or related to this Agreement or any Company Software or service shall be subject to the exclusive jurisdiction and venue of the courts situated in New York, and both Parties hereby consent to such jurisdiction and venue.
• Force Majeure : The Company will not be responsible or liable to the Licensee, or deemed in default or breach hereunder by reason of any failure or delay in the performance of its obligations hereunder where such failure or delay is lockdowns, due to strikes, labor disputes, civil disturbances, riot, rebellion, invasion, pandemic, epidemic, hostilities, war, terrorist attack, embargo, natural disaster, acts of God, flood, fire, sabotage, fluctuations or non-availability of electrical power, heat, light, air conditioning or any other circumstances caused beyond the Company’s reasonable control (“ Force Majeure Event ”). It is hereby clarified that the Licensee’s payment obligation shall continue during the Force Majeure Event.
• Notices : All notices, requests, consents, claims, demands, waivers and other communications hereunder shall be in writing and shall be deemed to have been given: (a) when delivered by hand (with written confirmation of receipt); (b) when received by the addressee if sent by a nationally recognized overnight courier (receipt requested); (c) on the date sent by e-mail (with confirmation of transmission) if sent during normal business hours of the recipient, and on the next business day if sent after normal business hours of the recipient; or (d) on the third day after the date mailed, by certified or registered mail, return receipt requested, postage prepaid.
• Entire Agreement : The terms and conditions of this Agreement, including its exhibits, constitutes the entire agreement between the parties with respect to the subject matter hereof, and merges and supersedes all prior and contemporaneous agreements, understandings, negotiations and discussions. Neither of the parties shall be bound by any conditions, definitions, warranties, understandings, or representations with respect to the subject matter hereof other than as expressly provided herein. The section headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. No oral explanation or oral information by either party hereto shall alter the meaning or interpretation of this Agreement. No amendments or modifications shall be effective unless in a writing signed by authorized representatives of both parties. These terms and conditions will prevail notwithstanding any different, conflicting or additional terms and conditions which may appear on any purchase order, acknowledgment or other writing not expressly incorporated into this Agreement.
• Assignment:

a. Licensee shall not assign or otherwise transfer any of its rights, or delegate or otherwise transfer any of its obligations or performance, under this Agreement, in each case whether voluntarily, involuntarily, by operation of law or otherwise, without Company’s prior written consent, which consent Company may give or withhold in its sole discretion. For purposes of the preceding sentence, and without limiting its generality, any merger, consolidation or reorganization involving Licensee (regardless of whether Licensee is a surviving or disappearing entity) will be deemed to be a transfer of rights, obligations or performance under this Agreement for which Company’s prior written consent is required. No delegation or other transfer will relieve Licensee of any of its obligations or performance under this Agreement. Any purported assignment, delegation or transfer in violation of this Clause 16.5 is void. The Company may assign or otherwise transfer all or any of its rights, or delegate or otherwise transfer all or any of its obligations or performance, under this Agreement without Licensee’s consent. This Agreement is binding upon and inures to the benefit of the parties hereto and their respective permitted successors and assigns.

b. This Agreement is for the sole benefit of the parties hereto and their respective successors and permitted assigns and nothing herein, express or implied, is intended to or shall confer on any other Person any legal or equitable right, benefit or remedy of any nature whatsoever under or by reason of this Agreement.

• Amendment and Waiver: This Agreement may only be amended, modified or supplemented by an agreement in writing signed by each party hereto. Failure or neglect by the Company to enforce at any time any of the provisions hereof shall not be construed nor shall be deemed to be a waiver of the Company’s rights hereunder nor in any way affect the validity of the whole or any part of this License nor prejudice the Company’s rights to take subsequent action.
• Reservation of Rights and Remedies: The Company reserves all of its rights to proceed to enforce its rights in connection with all rights not expressly granted to the Licensee in this Agreement.
• Severability: If any term or provision of this Agreement is invalid, illegal or unenforceable in any jurisdiction, such invalidity, illegality or unenforceability shall not affect any other term or provision shall to that extent be severed from the remaining terms, conditions and provisions which shall continue to be valid to the fullest extent permitted by law.
• Interpretation : For purposes of this Agreement, (a) the words “include,” “includes” and “including” shall be deemed to be followed by the words “without limitation”; (b) the word “or” is not exclusive; and (c) the words “herein,” “hereof,” “hereby,” “hereto” and “hereunder” refer to this Agreement as a whole. Unless the context otherwise requires, references herein: (x) to Sections and Exhibits refer to the Sections of, and Exhibits attached to, this Agreement; (y) to an agreement, instrument or other document means such agreement, instrument or other document as amended, supplemented and modified from time to time to the extent permitted by the provisions thereof and (z) to a statute means such statute as amended from time to time and includes any successor legislation thereto and any regulations promulgated thereunder. This Agreement shall be construed without regard to any presumption or rule requiring construction or interpretation against the party drafting an instrument or causing any instrument to be drafted. The headings in this Agreement are for reference only and do not affect the interpretation of this Agreement.
• Independent Development: This Agreement does not preclude the Company from evaluating, acquiring from third parties not a party to this Agreement, independently developing or marketing similar technologies or products, or making and entering into similar arrangements with other companies. The Company is not restricted by this Agreement to make such products or technologies available to third parties.
• Disclaimer: The Software Platform is subject to the Disclaimer set out in the Appendix V of this Agreement.

Appendix IV : Privacy Policy

Appendix v: disclaimer.

• All of the operating procedures with respect to the Software Platform have been designed based on the Company’s experience in working with hundreds of global family offices. Under no circumstances should any person using the Software Platform should make investment decisions based solely on the information setout therein. The Company is not a qualified financial advisor and the Licensee should not construe any information discussed herein to constitute investment advice. The information in the Software Platform is not meant to be, and should not be construed as advice or used for investment, financial planning, legal, accounting, or tax purposes. The Licensee agrees to consult with a registered investment advisor, which the Company is not, prior to making any investment/trading decision of any kind. No representation is being made that any account will or is likely to achieve profits or losses similar to those shown. It must be implemented as per individual family office requirements in consultation with the family office’s local accounting and legal professionals.
• The Software Platform is based upon information that is relevant while making investment decisions and the Company considers it reliable, but the Company does not represent that it is accurate or complete, and that it should be relied upon, as such. The Licensee should not rely solely on the information in making any investment. Rather, the Licensee should use the information only as a starting point for doing additional independent research in order to allow the Licensee to form its own opinion regarding investments. All recommendations, advice or opinions cited are the professional views of the Company. The Licensee must act upon them with due diligence.
• The Company is neither registered as a wealth advisor, wealth manager, investment advisor nor soliciting any investment in any jurisdiction. Further, the Company does not accept any responsibility or liability for the actions or inactions on the part of any individual or firm stemming from the information mentioned in the Software Platform. The Licensee is solely responsible for verifying the information as being appropriate for the Licensee’s use, including without limitation, seeking the advice of a qualified professional regarding any specific financial, legal, accounting, or tax questions that the Licensee may have.
• The Company makes no warranties and gives no assurances regarding the truth, timeliness, reliability, or good faith of any material/factual data in the Software Platform. The Company does not warrant that investment/trading methods or systems presented in the manual will result in profits or losses. The Company makes no guarantees as to the accurateness, quality, or completeness of the information and the Company shall not be responsible or liable for any errors, omissions, inaccuracies in the information or for Licensee’s reliance on the information Vis-à-vis the Software Platform.

Free Cash Flow Forecast Templates

By Andy Marker | June 24, 2020

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We’ve compiled the most useful free cash flow forecast templates, including those for small businesses, nonprofits, and personal cash flow forecasting, as well tips for performing a cash flow forecast.

Included on this page, you'll find a simple cash flow forecast template and a small business cash flow projection template , as well as the benefits of cash flow forecasting .

What Is a Cash Flow Forecast Template?

A cash flow forecasting template allows you to determine your company’s net amount of cash to continue operating your business. The template provides a way to examine day-by-day, month-by-month, quarter-by-quarter, or year-over-year projected cash receipts and cash payments as compared to your operating expenses and other outflows. 

Use the preset criteria in a template to take the guesswork out of cash flow forecast requirements. You can then use the forecast to provide your company (or third parties) with a clear picture of your projected business costs. While cash flow forecasting allows you to look at projected cash flow, you can also track the actual cash flow for any chosen time period (i.e., daily, weekly, monthly, quarterly, or yearly).

To learn more about cash flow forecasting and to view examples, visit " How to Create a Cash Flow Forecast, with Templates and Examples ."

Simple Cash Flow Forecast Template

Use this basic template to gain monthly insight into your company’s cash flow and ensure you have sufficient funds to continue operating. Fill in your information for beginning balance (cash on hand), cash receipts and disbursements (R&D), operating expenses, and additional expenses. The template will auto-tally the monthly net cash change and month ending cash position columns. Use this information to forecast how long your cash will last, and whether you need to obtain additional financing. 

Download Simple Cash Flow Projection Template -  Excel  

Small Business Cash Flow Projection Template

Use this cash flow projection template, designed for small businesses, to determine whether or not your business has adequate cash to meet its obligations. The monthly columns provide a big picture of how long funds should last, and the tallies for cash receipts, cash paid out, and other operating figures allow you to identify any potential shortfalls of your cash balances. This small business cash flow template also works with projected figures for a small business plan. 

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12-Month Cash Flow Forecast Template

Track your company’s overall cash flow with this easily fillable 12-month cash flow forecast template. This template includes unique expected and actual cash-on-hand details for the beginning of each month, which you can use to ensure that you can pay all employees and suppliers. Enter cash receipts and cash paid out figures to determine your end-of-month cash position. The monthly details of this forecast template allow you to track — at a glance — any threats to your company’s cash flow. 

Download 12-Month Cash Flow Forecast Template 

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Cash Flow Forecast Template

This simple cash flow forecast template provides a scannable view of your company’s projected cash flow. Sections include beginning and ending cash balances, cash sources, cash uses, and cash changes during the month. These details provide an accurate picture of your company’s projected month-by-month financial liquidity. Ultimately, this template will help you identify potential issues that you must address in order for your business to remain on sound fiscal footing. 

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Daily Cash Flow Forecast Template

Use this daily cash flow forecast template to get a pulse on your business’ short-term liquidity. Daily cash flow forecasts are particularly helpful in determining that everything is accounted for and for avoiding any shortfalls. The template calculates cash payments against operating expenses to provide a daily net cash change and month-ending cash positions. This template has everything you need to get a day-by-day perspective of your business’s financial performance and outlook.

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Quarterly Cash Flow Projections Template

Keep quarterly tabs on your cash flow with this customizable template. Use the quarter-by-quarter tabs to quickly detect any problems with a variety of factors, such as late customer payments and their potential impact on your business. This quarterly cash flow projections template is perfect for determining how any given variable might affect future financial planning. 

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Three-Year Cash Flow Forecast Template

Get the big picture of your company’s long-term cash flow with this three-year cash flow forecast template. The spreadsheet provides separate tabs for a current cash flow statement, as well as 12-month cash flow and three-year cash flow projections. Enter year-by-year operations, investing activities, and financing details to see your year-over-year net increases or decreases. You can save this template as an individual file with customized entries, or share it with other business units or departments that need to provide cash flow details.

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Discounted Cash Flow Forecast Template

Designed around the concept of discounted cash flow (DCF) valuation based on future cash flows, this template allows you to perform an analysis to determine your business’ true value. You’ll find year-by-year rows, their respective incomes (cash inflow), expenses (fixed and variable), cash outflow, net cash, and DCF details (present value and cumulative present value), and actual present value, all of which culminates in net present value. This DCF forecast template is also ideal for determining the value of a potential investment.

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Nonprofit Cash Flow Projection Template

Use this template to determine whether your nonprofit will have enough cash to meet its financial obligations. There are sections for cash receipts, contributions and support, government contracts, other revenue sources, and receivables from previous years. This template is completely customizable, and provides insight into monthly and yearly carryover, so you can keep tabs on your rolling cash balance.

‌Download Nonprofit Cash Flow Projection Template 

Personal Cash Flow Forecast Template

Manage your financial outlook with this personal cash flow forecast template. Compare your personal income to your expenses, with the additional factor of savings. The automatic pie chart provides insight into whether you’re spending above your means. Enter your income, savings, and expense data to get a comprehensive picture of your short and long-term cash flow.

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Creating a Cash Flow Forecast

In order to set yourself up for success, you must be realistic when forecasting cash flows. You can build your projections on a foundation of key assumptions about the monthly flow of cash to and from your business. For instance, knowing when your business will receive payments and when payments are due to outside vendors allows you to make more accurate assumptions about your final funds during an operating cycle. Estimated cash flows will always vary somewhat from actual performance, which is why it’s important to compare actual numbers to your projections on a monthly basis and update your cash flow forecast as necessary. It’s also wise to limit your forecast to a 12-month period for greater accuracy (and to save time). On a monthly basis, you can add another month to create a rolling, long-term projection.

A cash flow forecast may include the following sections:

• Operating Cash: The cash on hand that you have to work with at the start of a given period. For a monthly projection, this is the cash balance available at the start of a month.
• Revenue: Depending on the type of business, revenue may include estimated sales figures, tax refunds or grants, loan payments received, or incoming fees. The revenue section covers the total sources of cash for each month.
• Expenses: Cash outflows may include your salary and other payroll costs, business loan payments, rent, asset purchases, and other expenditures.
• Net Cash Flow: This refers to the closing cash balance, which reveals whether you have excess funds or a deficit.

Keep in mind that while many costs are recurring, you also need to consider one-time costs. Additionally, you should plan for seasonal changes that could impact business performance, as well as any upcoming promotional events that may boost sales. Depending on the size and complexity of your business, you may want to delegate the responsibility of creating a cash flow forecast to an accountant. However, small businesses can save time and money with a simple cash flow projections template.

The Benefits of Cash Flow Forecasting

Regardless of the reporting period, or granularity , you choose for your cash flow forecast, you should take into account important cash flow forecast-specific factors, such as seasonal trends, to gain a clear picture of your company’s finances. Accurate cash flow forecasting can enable you to do the following:

• Anticipate any cash-balance shortfalls. 
• Verify that you have enough cash on hand to pay suppliers and employees. 
• Call attention to customers not paying on time, and eliminate cash flow discrepancies. 
• Act proactively, in the event that cash flow issues will adversely affect budgets. 
• Notify stakeholders, such as banks, who might require such forecasting for loans.

Tips for Improving Cash Flow Forecasting

Whether you are a large or small business and want a day-by-day or three-year picture of your company’s projected cash flow,keep the following tips in mind: 

• Pick the Right Cash Flow Forecasting Template: There are templates available for a variety of forecasting needs, including those for organization size and one that provides short or long-term insights. Select a template that’s suitable to your particular cash flow forecasting needs. 
• Use a Discounted Cash Flow (DCF) Template: If you are looking to estimate the current value of your company, based on the time value of money (the benefit of receiving cash infusions sooner than later), you’ll want to do a DCF.
• Enter Variables Accurately: Inflows and outflows can change on a literal dime. Ensure that you tally all beginning balances (cash on hand), cash receipts and disbursements (R&D), and operating expenses correctly. These numbers provide the big-picture net cash change and your ultimate cash position. 
• Choose the Right Forecasting Horizon: The margin of error when using a three-year cash flow forecasting template is greater than performing a daily cash flow forecast. When choosing a template, keep in mind the time-period for the forecast. 
• Consider Seasonal Fluctuations: If your cash flow fluctuates by season (tax, interest, larger annual payments, etc.), incorporate those details into your cash flow forecast. This will ensure that one quarter’s inflow doesn’t positively or negatively affect another in your forecast.

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Preparing a cash flow forecast: Simple steps for vital insight

One of the questions we’re often asked by small business owners is, “how do I prepare a cash flow forecast?” It’s an important part of financial planning for any business. But, if you’re an entrepreneur or founder, you may not have an accounting or finance background.

It’s really simple to create your own forecast. And once you know how, it will become one of the most important pieces of insight into your business you have.

Why is a cash flow forecast important?

Cash flow planning is essential: you need cash in the bank to pay your bills. Staying on top of your cash flow will help you see if you’re going to run out of money - and when - so you can prepare ahead of time. Perhaps it will show you that you need to cut overheads, find new investment, or spend time generating sales.

On the flip side, you might be doing well, and you’re considering expanding into new markets, investing in new products, taking on bigger premises, or recruiting new staff. Having accurate cash flow projections will help you see if you can afford to take the plunge.

Four steps to a simple cash flow forecast

One option is to use free financial forecasting software online, which can help you plan ahead for the next week, 30 days, or six weeks. Or you can follow the four steps below to build your own cash flow forecast.

1. Decide how far out you want to plan for

Cash flow planning can cover anything from a few weeks to many months. Plan as far ahead as you can accurately predict. If you’re well-established, you might have a predictable sales pipeline and data from previous years. If you’re a new business, you might not have a huge amount of data - so the further out you go, the less accurate your predictions will be.

Don’t worry too much if you can’t plan far ahead. Your cash flow forecast can change over time. In fact, it should. As things change, or you get more exact estimates, you can update your plan.

2. List all your income

For each week or month in your cash flow forecast, list all the cash you’ve got coming in. Have one column for each week or month, and one row for each type of income.

Start with your sales, adding them to the appropriate week or month. You might be able to predict this from previous years’ figures, if you have them. Remember though, this is about when the cash is actually in your bank account. Put the figures in for when you know clients will pay invoices, or bank payments will clear.

Also remember to include all non-sales income, for example:

• Tax refunds
• Investment from shareholders or owners
• Royalties or licence fees

Add up the total for each column to get your net income.

3. List all your outgoings

Now you know what’s coming in, work out what you’ve got going out. For each week or month, make a list of all the money you’ll be spending, for example:

• Raw material
• Bank loans, fees and charges
• Marketing and advertising spend

Once you’ve listed everything you spend, add up the total for each column to get your net outgoings.

4. Work out your running cash flow

For each week or month column, take away your net outgoings from your net income. That will give you either a positive cash flow figure (you’ve got more cash coming in than you’re spending) or a negative cash flow figure (you’re spending more than you’ve got coming in).

You can then keep a running total, from week to week, or month to month, to get a picture of your cash flow forecast over time. Too many negative weeks might spell trouble, and you’ll need to do some forward-planning to make sure you can meet your commitments - e.g. paying salaries, loan payments, and rent. Equally a few positive months might signal that you’ve got money to expand or invest.

Jenni Chance

Senior Manager, Entrepreneurial & Private Business, PwC United Kingdom

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More From Forbes

How To Create A Cash Flow Plan That Works For Your Business

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If you're a business owner, you know that cash flow is the lifeblood of your business. Without a solid cash flow plan, your business can quickly run into trouble, and it can be challenging to stay afloat.

Fortunately, creating a cash flow plan that works for your business is not as complicated as it may seem. Many accounting software programs will generate cash reports with accuracy. But you must understand the information to make it useful.

Let's go through the essential steps you need to take to create a cash flow plan that will help your business thrive:

1. set up a cash flow projection.

First, you need to understand your current cash flow situation and develop a projection for the next few months. You can do this by reviewing your previous financial statements, reviewing recent trends, and forecasting future revenue and expenses. Create a spreadsheet or use accounting software to create a cash flow projection that you can update regularly. Make sure to factor in all your regular expenses, such as payroll, rent, and inventory and factor in unexpected fees or variable costs.

2. Monitor your accounts receivable

Keeping track of your payments and collections is essential. Ensure to send out invoices promptly and follow up with clients who have yet to pay you on time. You can also consider offering incentives or discounts for clients who pay early or charge penalties for those who pay late. Consider also assigning someone to monitor and manage your accounts receivable actively.

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Best covid-19 travel insurance plans, 3. manage your accounts payable.

As a business owner, you likely have several expenses that you need to pay, such as rent, utilities, and inventory. Managing these expenses carefully is essential so you can handle cash flow problems. Review your expenses and prioritize them by their payment deadlines. Consider setting up recurring payments, negotiating payment terms or extending payment deadlines for bills that aren't urgent.

4. Use incentives to get customers to pay quickly

By offering something extra to customers who pay their bills quickly, you're more likely to motivate them to do so. This could be a discount on their next purchase, a free service, or even a small gift card. Not only does this help you get paid faster, but it can also enhance your relationship with your customers by showing them that you value their commitment and loyalty to your business. So, go ahead and try incentivizing your customers to pay quickly – it's a win-win situation for everyone.

5. Ensure your business is profitable

One of the biggest risks you'll face as a business owner is having cash flow issues that threaten the stability of your operations. But what's the root cause of these financial challenges? It's simple - running a business that isn't profitable. Without consistent profits , you'll struggle to pay your bills, meet payroll obligations, or invest in new opportunities that can drive growth. That's why focusing on profitability is critical as a core aspect of your business strategy. Doing so gives you the financial stability you need to weather any storm and reach your long-term goals.

The bottom line is that creating a cash flow plan that works for your business requires careful analysis, regular monitoring, and adjusting your priorities. Whether you're a start-up or an established business owner, developing a cash flow plan is crucial for keeping your business healthy and sustainable. You have multiple options, from using budgeting software to seeking support from financial advisors. Following the steps outlined in this blog post, you can develop a comprehensive cash flow plan that sets your business on the path to success.

Melissa Houston, CPA is the author of Cash Confident: An Entrepreneur’s Guide to Creating a Profitable Business . She is the founder of She Means Profit, which is a podcast and blog . As a Finance Strategist for CEOs, Melissa helps successful business owners increase their profit margins so that they keep more money in their pocket and increase their net worth.

The opinions expressed in this article are not intended to replace any professional or expert accounting and/or tax advice whatsoever.

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How to Excel With Business Plan Cash Flow Projection Example: Tips & Tricks

To excel with a business plan cash flow projection example, start by accurately estimating future sales and expenses. Ensure you update projections regularly to reflect business changes.

Creating a reliable cash flow projection is crucial for steering your business towards financial stability and growth. A well-crafted business plan not only outlines the financial expectations but also attracts potential investors by showcasing realistic and strategic financial planning. It serves as a navigational tool that helps entrepreneurs steer through fiscal challenges by anticipating cash shortages and enabling proactive solutions.

By mastering cash flow projection techniques, business owners can ensure that they maintain sufficient liquidity to cover day-to-day operations and make informed decisions for long-term financial health. Key aspects include understanding the nuances of your revenue streams, closely monitoring expenditure, and preparing for unpredictability with a well-thought buffer. Expert tips can transform your projection into a dynamic part of your overall strategy, identifying potential pitfalls before they arise and pivot your business plan accordingly.

Introduction To Cash Flow Projections

Welcome to the world of savvy business planning, where cash flow projections become the lighthouse guiding your venture through the foggy seas of financial uncertainty. This journey explores the essentials of mapping out your business’s financial future. Let’s dive into the nuts and bolts of preparing effective cash flow forecasts that can propel your business strategy forward.

The Importance Of Business Plan Cash Flow

The lifeblood of any business is its cash flow. A robust business plan hinges on understanding where your revenue comes from and where your money goes. Solid cash flow projections spotlight potential shortfalls and surpluses. They help you make informed decisions about managing debt, investments, and operational costs. In short, it’s a financial compass for sustainable growth.

• Spot Financial Trends: Identify positive and negative financial flows early.
• Strategic Planning: Align cash flow insights with business strategies.
• Investor Confidence: Show investors your business is steady at the helm.
• Loan Assessment: Lenders favor businesses with clear financial forecasts.

Basic Concepts In Cash Flow Forecasting

Grasping the underlying principles of cash flow forecasting is like understanding the rules of the road before driving a car. Start by distinguishing between different types of cash flow: operational, investing, and financing .

Projecting your cash flow encompasses estimating these components over a set period. Craft a meticulous schedule, typically on a monthly basis, to predict the cash entering and leaving your business. Balance accuracy with pragmatism to create a functional and dynamic tool.

• Estimate Sales: Foresee future sales based on market analysis.
• Monitor Costs: Include all operational costs and incidentals.
• Analyze Profitability: Match revenue against expenses to find net flow.

Remember, cash flow forecasting is an ongoing process. Regularly update your projections with real-time data for best results.

Setting The Stage For A Strong Projection

Cash flow projection paints a picture of your business finances in the future. It is a vital map guiding your company’s journey through the financial landscape. A strong projection can mean the difference between navigating success and getting lost in a sea of numbers. Let’s set the stage for a cash flow projection that stands out.

Identifying Key Components For Projection

Every projection starts with key building blocks . These include:

• Income sources: Sales, investments, loans.
• Expense categories: Raw materials, salaries, utilities.
• Capital expenditures: New equipment, property.
• Debt financing: Loan repayments, interest costs.

Recognizing these elements forms the basis of a realistic cash flow projection .

Gathering Financial Data

Accurate financial data is essential for creating a solid projection. Begin by collecting:

With this information, your projection will have a solid foundation .

Creating Your Cash Flow Template

Crafting a precise cash flow template is a cornerstone to mastering your business finances. This roadmap represents the bloodline of your company’s monetary health. Let’s dive into structuring your very own template with practicality and foresight.

Essential Elements Of A Cash Flow Template

Every business must monitor its liquidity. A cash flow template captures this. The essential elements include:

• Starting Balance: Capture your cash balance at the period’s beginning.
• Cash Incoming: Record all sources of cash influx, like sales or loans.
• Cash Outgoing: List all expenses, from rent to utilities.
• Net Cash Flow: It’s incoming minus outgoing cash.
• Ending Balance: This is your starting balance plus net cash flow.

A streamlined template integrates these elements beautifully. A glance lets business owners see their liquidity state.

The Role Of Spreadsheet Software

Digitized templates harness the power of spreadsheet software. These tools offer:

• Flexibility in modifying templates
• Formulas that automate calculations
• Real-time data update and analysis
• Accessible summaries through charts

Microsoft Excel or Google Sheets are prime picks. They offer an array of features:

With these software solutions, your template becomes a dynamic tool. You don’t just track but also predict future cash flow scenarios.

Remember to keep your cash flow projection accurate. Bold assertions in your planning could transform your business trajectory. Let this template be your guide to financial clarity and strategic foresight!

Inputting Your Numbers

Guiding your business through the financial unknown starts with accurately inputting your numbers into a cash flow projection. This is your road map for future financial health. Plunging into this task without delay will pave a path for sustainable growth. Here, we’ll cover the essentials of sales projections and expense mapping.

Starting With Sales Projections

A sales forecast is the backbone of your cash flow projection. It demands precision and attention to detail. Kick off by reflecting on past sales data, market research, and current trends. Let’s break down this journey:

• Review historical data: Look at past sales to set a realistic benchmark .
• Consider market conditions: Align expectations with industry trends and economic forecasts .
• Analyze competitive landscape: Understand your competitors’ impact on your sales.
• Seasonal fluctuations: Account for peaks and troughs with monthly or quarterly breakdowns.

Project confident sales figures by combining these factors for an informed prediction.

Mapping Out Expenses And Outlays

Business success flows from a thorough understanding of every penny it spends. Let’s chart the territory of expense tracking:

• Fixed costs: These are consistent expenses such as rent, salaries, and utilities.
• Variable costs: Costs that change, like materials and shipping.
• One-off expenses: Plan for irregular spends such as equipment or business travel.

Detailing each category ensures no expense goes unnoticed . Use this framework to develop a comprehensive ledger of your cash outflows.

Presenting data in a clear table format like above provides a quick visual reference and ensures accuracy in your projections.

Factoring In Seasonality And Trends

Understanding the impact of seasonality and trends plays a vital role in the precision of a business plan cash flow projection. Recognizing how these factors influence revenue and expenses can transform an average financial forecast into a powerful tool for decision-making. It becomes crucial to adjust for business cycles and analyze historical data to ensure accuracy in projections.

Adjusting For Business Cycles

Business cycles refer to the highs and lows in demand that occur throughout the year. Factoring in these fluctuations ensures that your cash flow projection reflects the reality of your business operations.

• Identify peak seasons: When do sales skyrocket? Adjust your cash inflows accordingly.
• Note slow periods: Recognize when your sales may dip to anticipate potential cash outflow concerns.
• Plan for variance: Include a buffer in your forecasts to safeguard against unexpected changes.

Analyzing Historical Data For Accuracy

To make well-informed projections, detailed analysis of past financial data is essential. This helps in understanding how previous trends could shape future cash flows.

Repeat rows for each season of each year

• Look for patterns: Examine the table to identify trends over multiple years.
• Consider anomalies: Separate unusual events from regular trends to avoid skewing the data.
• Use precise numbers: Rely on exact figures rather than rough estimates to bolster your projection’s reliability.

The Power Of Conservative Estimating

In the business world, ‘The Power of Conservative Estimating’ is a game-changer. It’s not about underselling your potential. It’s about grounding your cash flow projections in a reality that can weather storms.

Envision the pathway to success with a mindset that respects potential bumps. Being cautiously optimistic in your cash flow forecast ignites trust. It shows stakeholders your business can thrive, even when challenges appear.

Why Erring On The Side Of Caution Pays Off

• Stress test your finances . This identifies weak spots early.
• A realistic approach secures investor confidence .
• Prepare for sudden costs, ensuring flexibility in your plan .
• Boost your resilience against market volatilities.

Scenario Planning For Best And Worst Cases

Map out various outcomes and their impacts on cash flow . Tackle unpredictability head-on.

Prepare for each scenario with a tailored strategy. This ensures readiness for any financial climate .

Regular Reviews And Updates

Mastering the art of managing your business’ cash flow begins with regular reviews and updates of your projections. Like a garden that needs consistent care, your business plan’s cash flow projection is a living document. It requires frequent attention to thrive and adapt to real-world changes. Staying on top of these reviews helps to ensure financial health and can alert you to potential risks before they grow into problems.

Scheduling Periodic Check-ins

Embedding a rhythm of periodic check-ins into your routine is crucial. These moments are your chance to review the numbers and adjust plans as needed. Consider setting up a regular schedule, perhaps monthly or quarterly, to reassess your cash flow projections. Use calendar reminders or project management tools to keep these appointments on track.

• Monthly Reviews: Ideal for catching deviations early and adjusting quickly.
• Quarterly Assessments: Beneficial for broader trends and seasonal changes.
• Annual Summaries: Perfect for long-term planning and major strategic shifts.

Refining Your Projections With Real Data

Using actual financial data brings life to your projections. It fine-tunes your predictions with accuracy that only reality can provide. Gather data from income statements, cash flow statements, and other financial reports. Update your projections with these real numbers to reflect the true state of your business finances. Doing so will help pinpoint where your business is outperforming or underperforming expectations.

Add more rows as needed

Navigating Potential Pitfalls

Creating a robust business plan is crucial for your company’s success. One key component? A cash flow projection. This forecast lays a foundation for financial health. Yet, it’s easy to slip on unseen hurdles. Let’s explore common mistakes and avoid pitfalls to keep your business on solid footing.

Common Cash Flow Projection Mistakes

Errors in cash flow projections can derail your business. Look out for these traps:

• Incomplete Data: Skipping details may lead to understated expenses or overstated income.
• Mismatched Timing: When cash inflows and outflows aren’t synced, it can skew your projection.
• Forgotten Expenses: Every penny counts. Overlooking small costs adds up to big miscalculations.

Avoiding Overoptimism In Your Forecasts

Staying grounded in reality is crucial. To prevent overoptimism:

• Be Conservative: Plan for the worst, and you’ll be prepared for anything.
• Use Past Data: Historical trends are guiding lights. Base your projections on them.
• Include Contingencies: Unexpected events happen. Set aside a buffer to safeguard your forecast.

Using Projections To Make Strategic Decisions

Business success often hinges on the wise decisions you make. A cash flow projection is a valuable roadmap. It can guide your strategic choices. Let’s explore how to use these projections effectively.

Driving Business Strategy With Cash Flow Insights

Good leaders steer companies to profitability. They use cash flow analyses . With accurate forecasts, clear decisions are within reach. These insights create a strategy that aligns with financial health.

• Identify peak cash periods : Use these times for strategic investments.
• Spot cash dips early : Prepare with saving or credit options.
• Adjust pricing or sales strategies : Do this based on cash flow trends.

Identifying Investment Opportunities And Risks

Vigilant businesses thrive. Use cash flow projections for spotting opportunities and risks . Wise investments are often the result.

To make strategic decisions:

• Review projections monthly.
• Match investment size to cash flow comfort.
• Consider risk management strategies.

Leveraging Technology For Accurate Projections

In today’s fast-paced business environment, leveraging technology for accurate cash flow projections is vital. Gone are the days of manual calculations and guesswork. With the right tools, businesses can secure a clearer financial future. Now, let’s dive into how cutting-edge financial software and automation elevate cash flow analysis.

The Role Of Financial Software In Projection Accuracy

Financial software acts as a compass in the sea of financial planning. It guides businesses with precision and reliability . Here is how:

• Uses historical data for trend analysis.
• Reduces human errors in calculations.
• Provides real-time insights into financial health.
• Allows for scenario planning and forecasting.

Implementing top-tier financial software means making decisions based on solid data , not hunches.

Automating Cash Flow Analysis

Automation streamlines cash flow management . The benefits include:

• Time-saving through automated report generation.
• Consistent tracking of income and expenses.
• Minimizes the risk of missed or late payments.
• Keeps a finger on the pulse of your business’s liquidity.

With automation, you get a clear, up-to-date picture of your cash flow, empowering you to make informed decisions quickly.

Conclusion: Integrating Projections Into Overall Strategy

Successful business management hinges on foresight. A well-crafted cash flow projection is essential. It guides leaders to make informed decisions. Let’s explore key steps to ensure cash flow projections boost your business strategy.

The Big Picture: Cash Flow Projections And Business Success

A robust projection aligns with your business’s objectives and goals. Seeing the big picture is crucial. Here’s how:

• Match projections with short-term and long-term plans.
• Analyze different scenarios, including best and worst cases.
• Balance ambition with realistic financial capabilities.

Integrating projections supports strategic adjustments. It allows for dynamic business growth.

Continual Learning And Adaptation In Financial Management

The business environment never stands still. Neither should your financial management. Always be ready to learn and adapt.

• Regularly review your cash flow projections.
• Stay up-to-date with market trends and economic shifts .
• Use new insights to refine financial strategies.

With ongoing learning and flexibility, your business stays resilient. Use cash flow projections to navigate to success.

Frequently Asked

How to do cash flow projection for a business plan.

Estimate your business’s future sales and expenses. Record these projections monthly for the first year. Also, factor in expected cash payments and receipts. Update your forecast regularly to reflect actual performance and market changes. Use this model to predict future cash flow.

How Do I Create A Cash Flow Forecast In Excel?

Open Excel and set up your columns with headings like “Income,” “Expenses,” and “Net Cash Flow. ” Estimate monthly incomes and expenses, entering these under appropriate headings. Subtract expenses from income to calculate net cash flow for each month. Summarize to project future cash balances.

What Is The Formula For The Cash Flow Projection?

The cash flow projection formula is: Beginning Cash + Projected Inflows – Projected Outflows = Ending Cash. This estimates your business’s cash position over a given period.

How Do You Present Cash Flow In Excel?

To present cash flow in Excel, create a worksheet with separate sections for operating, investing, and financing activities. Record cash inflows and outflows under each category, then calculate the net cash flow. Use formulas for automatic updates when inputting new data.

Crafting a robust business plan cash flow projection isn’t just a skill—it’s an essential business compass. With the strategies outlined, you’ll navigate financial forecasts more effectively. Remember to revisit and adjust your projections regularly, ensuring they serve as a dynamic tool for business growth.

Embrace the process, and let these projections illuminate the path to your company’s success.

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Run » finance, how to create a financial forecast for a startup business plan.

Financial forecasting allows you to measure the progress of your new business by benchmarking performance against anticipated sales and costs.

When starting a new business, a financial forecast is an important tool for recruiting investors as well as for budgeting for your first months of operating. A financial forecast is used to predict the cash flow necessary to operate the company day-to-day and cover financial liabilities.

Many lenders and investors ask for a financial forecast as part of a business plan; however, with no sales under your belt, it can be tricky to estimate how much money you will need to cover your expenses. Here’s how to begin creating a financial forecast for a new business.

[Read more: Startup 2021: Business Plan Financials ]

Start with a sales forecast

A sales forecast attempts to predict what your monthly sales will be for up to 18 months after launching your business. Creating a sales forecast without any past results is a little difficult. In this case, many entrepreneurs make their predictions using industry trends, market analysis demonstrating the population of potential customers and consumer trends. A sales forecast shows investors and lenders that you have a solid understanding of your target market and a clear vision of who will buy your product or service.

A sales forecast typically breaks down monthly sales by unit and price point. Beyond year two of being in business, the sales forecast can be shown quarterly, instead of monthly. Most financial lenders and investors like to see a three-year sales forecast as part of your startup business plan.

Lower fixed costs mean less risk, which might be theoretical in business schools but are very concrete when you have rent and payroll checks to sign.

Tim Berry, president and founder of Palo Alto Software

Create an expenses budget

An expenses budget forecasts how much you anticipate spending during the first years of operating. This includes both your overhead costs and operating expenses — any financial spending that you anticipate during the course of running your business.

Most experts recommend breaking down your expenses forecast by fixed and variable costs. Fixed costs are things such as rent and payroll, while variable costs change depending on demand and sales — advertising and promotional expenses, for instance. Breaking down costs into these two categories can help you better budget and improve your profitability.

"Lower fixed costs mean less risk, which might be theoretical in business schools but are very concrete when you have rent and payroll checks to sign," Tim Berry, president and founder of Palo Alto Software, told Inc . "Most of your variable costs are in those direct costs that belong in your sales forecast, but there are also some variable expenses, like ads and rebates and such."

Project your break-even point

Together, your expenses budget and sales forecast paints a picture of your profitability. Your break-even projection is the date at which you believe your business will become profitable — when more money is earned than spent. Very few businesses are profitable overnight or even in their first year. Most businesses take two to three years to be profitable, but others take far longer: Tesla , for instance, took 18 years to see its first full-year profit.

Lenders and investors will be interested in your break-even point as a projection of when they can begin to recoup their investment. Likewise, your CFO or operations manager can make better decisions after measuring the company’s results against its forecasts.

[Read more: ​​ Startup 2021: Writing a Business Plan? Here’s How to Do It, Step by Step ]

Develop a cash flow projection

A cash flow statement (or projection, for a new business) shows the flow of dollars moving in and out of the business. This is based on the sales forecast, your balance sheet and other assumptions you’ve used to create your expenses projection.

“If you are starting a new business and do not have these historical financial statements, you start by projecting a cash-flow statement broken down into 12 months,” wrote Inc . The cash flow statement will include projected cash flows from operating, investing and financing your business activities.

Keep in mind that most business plans involve developing specific financial documents: income statements, pro formas and a balance sheet, for instance. These documents may be required by investors or lenders; financial projections can help inform the development of those statements and guide your business as it grows.

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Cash Flow Projection: Glimpse into Your Financial Future

Your cash flow statement can give you an idea of your business’s current financial health. But, wouldn’t it be nice to see your company’s future cash flow? You don’t need a crystal ball to view your cash flow’s future. Instead, create a cash flow projection. Read on to learn about cash flow projection and how to project cash flow.

What is cash flow projection?

First things first, if you want to learn about cash flow projections, you need to know what cash flow is.

Cash flow is the amount of money going in and out of your business. Healthy cash flow can help lead your business on a path to success. But poor or negative cash flow can spell doom for the future of your business.

If you want to predict your business’s cash flow, create a cash flow projection. A cash flow projection estimates the money you expect to flow in and out of your business, including all of your income and expenses.

Typically, most businesses’ cash flow projections cover a 12-month period. However, your business can create a weekly, monthly, or semi-annual cash flow projection.

Advantages of projecting cash flow

Estimating anticipated cash flow projections can help boost your business’s success.

Projecting cash flows has many advantages. Some pros of creating a cash flow projection include being able to:

• Predict cash shortages and surpluses
• See and compare business expenses and income for periods
• Estimate effects of business change (e.g., hiring an employee)
• Prove to lenders your ability to repay on time
• Determine if you need to make adjustments (e.g., cutting expenses)

Cash flow projection isn’t for every business. Your projected cash flow analysis can be time-consuming and costly if done wrong.

Keep in mind that cash flow predictions will likely never be perfect. However, you can use your projected cash flow as a tool to help manage cash flow .

The bottom line is, your cash projections give you a clearer picture of where your business is headed. And, it can show you where you need to make improvements and cut costs.

How to calculate projected cash flow

If you’re ready to start calculating projected cash flow for your business, start gathering some historical accounting data.

You need to get reports detailing your business’s income and expenses from your accountant, books, or accounting software. Depending on the timeframe you want to predict, you might need to gather additional information.

Want to learn how to calculate cash flow projections? Use the projected cash flows steps below.

1. Find your business’s cash for the beginning of the period

To calculate your cash from the beginning of the period, you need to subtract the previous period’s expenses from income.

Cash at Beginning of Period = Previous Period’s Income – Previous Period’s Expenses

2. Estimate incoming cash for next period

Next, you need to predict how much cash will come into your business during the next period.

Incoming cash includes things like revenue, sales made on credit, loans, and more.

You can forecast future cash by looking at trends from previous periods. Be sure to account for any changes or factors that differ from previous periods (e.g., new products).

3. Estimate expenses for next period

Think about all the expenses you will pay next period. Consider things like raw materials, rent, utilities, insurance, and other bills.

4. Subtract estimated expenses from income

To calculate your business’s cash flow, subtract your estimated expenses from your estimated income.

Cash Flow = Estimated Income – Estimated Expenses

5. Add cash flow to opening balance

After you calculate cash flow, you need to add it to your opening balance. This will also give you your closing balance. Your closing balance will carry over to act as your starting balance for the next period.

To complete the next period’s projected cash flow, repeat the steps from above.

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Creating a projection of cash flow

If you want to create your own cash flow projection, start drafting out columns for your future periods. Or, you can take advantage of a spreadsheet to organize your cash flow statement projections.

You should include the following categories in your cash flow projection:

• Opening balance
• Cash in (e.g., sales)
• Cash out (e.g., expenses)
• Totals for cash in and cash out
• Uses of cash (e.g., materials)
• Total cash flow for the period
• Closing balance
• Periods (e.g., month of January)

After you lay out the sections on your cash flow projection report, plug in your projected cash flow calculations.

Revisiting your cash flow projection

Cash flow projections are not set in stone. Revisit your projection from time to time to see where you stand.

If you see major differences or flaws in your cash flow forecast, it may be time to crunch more numbers and do some digging. Pinpointing issues with your projection early on can prevent major inaccuracies in the future.

To ensure your projection stays as accurate as possible, consider variable expenses such as:

• Months with three paychecks
• Sales during peak seasons
• Months when premiums are due (e.g., insurance)
• Hiring additional workers

A good rule of thumb is to not project too far into the future. Too many variables can come into play with your business (e.g., dip in the economy) and affect your future cash flow.

As mentioned, a standard time period for cash flow projection is 12 months. Try to limit your cash flow projection time period to only a year in advance. That way, you can help prevent unforeseen expenses and errors impacting your projection.

If you don’t have time to track financial forecasts, consider delegating projection updates to a bookkeeper. Or, you can streamline the way you track cash flow with basic accounting software.

For an accurate cash flow projection, you need to receive and track customer payments. Patriot’s online accounting software lets you record your income and expenses to keep your finances in tip-top shape. What are you waiting for? Get started with a free trial today!

We’re always ready to keep the conversation going. Give us a like on Facebook and share your thoughts on our latest articles.

This article has been updated from its original publication date of August 28, 2012.

This is not intended as legal advice; for more information, please click here.

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User-friendly 3-year cash flow projection template for hassle-free forecasting

A cash flow projection is a crucial tool for businesses to forecast their future financial health. With a 3-year cash flow projection template , a financial forecast can be made that estimates the anticipated inflows and outflows of cash for a business over a three-year period.

Estimating the inflows and outflows of cash over a 3-year timeline provides insights into the expected cash position of the company and helps in assessing its financial health and sustainability. Businesses can make informed decisions, plan for growth, and identify potential cash shortages based on such financial forecasts.

What is a cash flow spreadsheet?

A cash flow spreadsheet, also called a cash flow statement projection, uses software like Excel or Google Sheets to track and analyse cash inflows and outflows.

The spreadsheet has columns for periods (e.g., months) and rows for cash flow categories. This tool allows input of actual and projected numbers, providing a visual representation of trends and aiding cash flow monitoring. It helps identify shortages/surpluses and informs financial decisions. Formulas automate calculations, generating summaries, charts, and graphs. Crucial for financial planning, budgeting, and forecasting, this spreadsheet streamlines the analysis and interpretation of cash flow data.

What is a projected 3-year cash flow?

A projected 3-year cash flow is a financial statement that outlines the anticipated cash inflows and outflows for a business over a specific three-year timeframe. It takes into account factors such as sales revenue, expenses, investments, loan repayments, and other sources. It uses cash to determine the net cash position at the end of each period.

Using a 3-year cash flow projection template, a projection is made, which serves as a tool for businesses to plan and make informed financial decisions.

Purpose of a projected 3-year cash flow for businesses

The primary purpose of a projected 3-year cash flow is to provide a forward-looking view of a company's cash position. Estimating future cash flows helps businesses to :

Forecast financial health: A projected cash flow allows businesses to assess their financial health and solvency by identifying potential cash shortfalls or surpluses in advance.

Plan for growth: The forecasting helps in evaluating the financial feasibility of growth strategies, such as expanding operations, entering new markets, or investing in new products or services.

Identify financing needs: It enables businesses to determine if additional financings, such as loans or equity investments, will be required to cover anticipated cash deficits or support growth initiatives.

Make informed decisions: With a clear understanding of future cash flows, businesses can make informed decisions about expenditures, pricing strategies, cost management, and investment opportunities.

How to do yearly cash flow projection?

To create a yearly cash flow projection, follow these steps:

• Set up spreadsheet: Organise categories, ensure systematic data entry and calculations.
• Identify and estimate cash inflows: Consider sales revenue, receivables, interest income, etc.
• Identify and estimate cash outflows: Categorise and estimate expenses like rent, payroll, and loans.
• Calculate net cash flow: Subtract total outflows from inflows for surplus/deficit.
• Calculate opening and closing balances: Consider the previous period's closing balance, and add net cash flow.
• Review and adjust: Compare projection to actual data, and update for accuracy.
• Monitor and update: Stay informed of changes in revenue, expenses, and market conditions.
• Analyse and make decisions: Compare projections to goals, assess financial health, and make informed choices for cost management, investments, and strategies.

By forecasting future cash flows, businesses can proactively address potential financial challenges, plan for growth, and make informed decisions.

How to do triennial cash flow projections?

The process of creating a yearly cash flow projection is similar to that of a three-year cash flow projection. To create a projected 3-year cash flow, businesses gather historical financial data and use it as a basis for estimating future cash flows.

By analysing past trends and considering factors such as market conditions, sales forecasts, expense projections, and capital expenditure plans, businesses can build a comprehensive and realistic cash flow projection.

Step 1: Gather historical data

To begin, collect your company's historical financial statements, including balance sheets, income statements, and c ash flow statements for the past three years. This data will serve as a foundation for building your cash flow forecast.

Step 2: Identify cash inflows

List all potential sources of cash inflows , such as sales revenue, loans, investments, and other income streams. Analyse your historical data to determine the average amounts and timing of these inflows. Consider factors like seasonality, market trends, and any upcoming changes in your business operations that may affect cash inflows.

Step 3: Estimate cash outflows

Next, identify and categorise your expected cash outflows. This includes costs such as employee salaries, rent, utilities, raw materials, marketing expenses, loan repayments, and taxes. Again, refer to your historical financial data and account for any anticipated changes in costs, such as upcoming investments or cost-saving measures.

Step 4: Calculate net cash flow

By deducting the total cash outflows from the total cash inflows, you can calculate your net cash flow for each period. A cash flow positive indicates a surplus, while a negative value indicates a cash deficit. Be realistic and conservative in your estimations to ensure accuracy in your projection.

Step 5: Consider cash reserves and financing options

Assess your current cash reserves and determine if they are sufficient to cover any projected cash deficits .

Explore financing options such as bank loans, lines of credit, or equity investments to bridge the gap, if any. Incorporate these additional funds into your projection, including the associated costs and repayment terms.

Step 6: Review and refine

Regularly review and refine your cash flow projection as new information becomes available or circumstances change. Update your projection at least on a quarterly basis, comparing the actual results with your projections to identify any discrepancies or adjustments required.

What is a cash flow statement template?

A cash flow statement template is a tool used to present a business's cash inflows & outflows over a specific period. The template provides a structured format to organise and analyse cash flow information, allowing businesses and individuals to assess their liquidity, financial health, and cash management capabilities. It helps track the movement of cash throughout different activities, such as operating, investing, and financing activities.

A typical cash flow statement template consists of the following:

Opening Cash Balance: It represents the cash balance at the beginning of the period.

Cash Inflows: These include the sources of cash during the period, such as cash received from sales, interest income, dividends, or any other cash receipts.

Cash Outflows: These accounts for the cash payments made during the period, including expenses, purchases of assets, interest payments, taxes, and other operating costs.

Operating Activities: It summarises the cash flows related to the core operations of the business, such as revenue incurred from sales, payments made to suppliers, salaries & wages, and other operating expenses.

Investing Activities: It captures cash flows from investing activities, such as purchases or sales of property, plant, and equipment, investments in other businesses, or proceeds from the sale of investments.

Financing Activities: It records cash flows from financing activities, including proceeds from loans, issuance of stock, repayment of debt, or payment of dividends.

Net Cash Flow: It calculates the net increase or decrease in cash during the period by deducting the total cash outflows from the total cash inflows.

Closing Cash Balance: It shows the cash balance at the end of the period, which is calculated by adding the net cash flow to the opening cash balance.

Free 3-year Cash flow projection template for easy use

Benefits of using a 3-year cash flow projection template.

The benefits of using a 3-year cash flow projection template are:

• Gain a comprehensive understanding of how future projects affect your business's financial performance.
• Anticipate and plan for any potential cash shortfalls, allowing you to effectively strategise and manage your resources.
• Proactively adjust and adapt to changes by utilising the insights from the 3-year projections.
• Utilise the projections to outline and formulate growth and expansion strategies.
• Perform variance analysis to compare and assess the variance between budgeted and actual cash flows.
• Enhance your chances of securing bank loans and external financing by presenting a solid cash flow and forecast and demonstrating a strong repayment capacity.
• Conduct accurate analysis of detailed scenarios, enabling you to make informed decisions.
• Evaluate the impact of cost-saving measures on future cash flows and overall business valuations.

Creating a 3-year cash flow projection is an essential financial planning exercise for businesses. It is a valuable financial planning tool that helps businesses anticipate and manage their cash position.

By analysing historical data, estimating cash inflows and outflows, and considering potential financing options, you can gain valuable insights into your company's financial future.

Regularly updating and revising the projection based on actual results and changing circumstances allows businesses to stay on top of their financial situation and ensure long-term sustainability.

A 3-year cash flow forecast is crucial for long-term cash planning. How can you manage your cash flow better? Agicap is a cash management software that allows you to manage your business effectively. Try it out for free!

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Cash Flow Forecasting: A Comprehensive How-To Guide for Businesses

Kim baldwin.

IIn the dynamic world of business finance, cash flow forecasting is a cornerstone of effective financial management. This process predicts future cash flow, showing how much money will come in and go out. This helps businesses understand their finances and the challenges they might face. 

Cash flow forecasts are important for businesses. They help navigate market changes, economic uncertainties, and growth opportunities. By effectively predicting their cash flow, companies can stay stable, grow and make smart choices. But what is a cash flow forecast in the first place? In this blog, we will explore the intricacies of cash flow forecasting and its pivotal role in driving business success. 

What is Cash Flow Forecasting? 

Cash flow forecasting is estimating a business’s future financial position by projecting the expected cash inflows and outflows over a period of time, usually on a monthly or quarterly basis. The purpose of cash flow forecasting is to ensure that a company maintains sufficient liquidity to meet its financial obligations and capitalize on growth opportunities. In other words, it helps predict what cash on hand a business will have in its bank account.  

Cash flow goes beyond simple profit calculations to provide a real-time view of a company’s financial health. It helps to prevent cash shortages. Low cash on hand leads to missed payments, damaged relationships with suppliers, and/or missed opportunities for expansion. 

Unlike broader financial projections such as income statements or balance sheets, which focus on overall profitability or asset valuation, cash flow forecasting specifically targets the timing and amount of actual cash entering and exiting the business. This detailed, time-sensitive view of cash availability is crucial for effective day-to-day operations and short to medium-term planning. 

Accurate cash flow forecasts are essential in preventing cash-on-hand issues that can cripple even profitable businesses. By anticipating cash shortfalls or surpluses, companies can take proactive measures to manage their accounts receivable days , ensuring a steady flow of cash. 

Benefits of Cash Flow Forecasting 

Cash flow forecasting offers many benefits that extend far beyond basic financial planning. At its core, it empowers businesses to make informed decisions, manage risks effectively, and seize strategic opportunities. 

Firstly, cash flow forecasting significantly enhances financial planning. A clear view of future cash positions allows businesses to budget more accurately and plan for both short-term operations and long-term investments. This improved planning capability helps align financial resources with broader business goals, ensuring that capital is available when needed for critical initiatives. 

Secondly, cash flow forecasting is a powerful tool for risk management. It helps businesses identify potential financial challenges before they become critical, enabling them to take proactive measures. This could involve securing additional financing, adjusting payment terms with suppliers, or implementing cost-cutting measures. By forecasting cash flow gaps, companies can avoid the stress and potential damage caused by unexpected shortfalls. 

Lastly, accurate forecasts support strategic decision-making by providing a solid foundation for investment decisions and growth strategies. They help businesses determine the optimal timing for major expenditures, expansions, or new product launches.

Moreover, effective cash flow management, supported by accurate forecasting, can significantly impact a company’s financial health. For instance, managing Days Sales Outstanding (DSO) effectively can improve overall cash flow, reinforcing the importance of integrating cash flow forecasting with broader financial management strategies. 

Enhanced Financial Planning 

Cash flow forecasting serves as the backbone of robust financial planning and budgeting processes. By providing a detailed projection of cash inflows and outflows, it enables businesses to create more realistic budgets. This level of insight allows companies to: 

• Anticipate periods of cash surplus or deficit, facilitating proactive resource allocation 
• Identify potential timing mismatches between income and expenses 
• Set more achievable financial targets based on projected cash availability 
• Adjust spending plans to maintain adequate liquidity throughout the year 
• Plan for major expenditures or investments by ensuring sufficient cash will be available 

Furthermore, cash flow forecasting plays a crucial role in aligning financial resources with business goals. It provides the visibility needed to: 

• Prioritize spending on strategic initiatives that align with long-term objectives 
• Identify opportunities for reinvestment in growth areas when cash surpluses are projected 
• Make informed decisions about the timing of major projects or expansions 
• Determine optimal timing for raising capital or seeking financing to support business goals 
• Balance short-term operational needs with long-term strategic investments 

This alignment ensures that financial resources are deployed effectively to support the company’s overall strategy and goals, rather than being reactive to short-term cash flow pressures. 

Risk Management and Mitigation 

Cash flow forecasting is an invaluable tool for identifying and mitigating potential financial risks. By projecting future cash positions, businesses can anticipate and prepare for various financial challenges, including: 

• Seasonal fluctuations in revenue or expenses 
• Unexpected market downturns or economic recessions 
• Changes in customer payment behaviors 
• Sudden increases in operational costs 

Armed with this foresight, companies can implement risk mitigation strategies such as: 

• Building cash reserves during projected surplus periods 
• Negotiating flexible payment terms with suppliers 
• Diversifying revenue streams to reduce reliance on a single market or customer 
• Implementing cost-cutting measures in anticipation of lean periods 

Moreover, cash flow forecasting helps businesses prepare for broader market fluctuations and economic downturns. By running multiple forecast scenarios based on different economic conditions, companies can develop contingency plans and maintain financial stability even in challenging times. 

Strategic Investment Decisions 

Accurate cash flow forecasts are instrumental in informing and supporting strategic investment decisions. They provide a clear picture of when and how much cash will be available for investments, allowing businesses to: 

• Determine the optimal timing for major capital expenditures 
• Evaluate the feasibility of expansion plans or new product launches 
• Assess the impact of potential acquisitions or mergers on cash flow 
• Decide on the most appropriate financing options for large investments

Furthermore, cash flow forecasting impacts capital allocation and resource management by: 

• Highlighting areas where resources may be underutilized or over-allocated 
• Identifying opportunities to redirect cash to more profitable ventures 
• Supporting decisions on dividend payments or share buybacks 
• Guiding working capital management strategies 

By providing a comprehensive view of future cash availability, forecasting enables businesses to make investment decisions that align with their financial capabilities and strategic objectives. 

How to Forecast Cash Flow 

Developing an accurate cash flow forecast involves a systematic approach that combines historical data analysis with forward-looking projections. Here is a step-by-step process: 

• Define the forecast period (e.g., monthly for the next 12 months) 
• Gather historical financial data, including sales, expenses, and cash flow statements 
• Identify and categorize all sources of cash inflows (e.g., sales, investments, loans) 
• List all expected cash outflows (e.g., operating expenses, loan repayments, taxes) 
• Project future inflows and outflows based on historical trends and known future events 
• Consider timing differences between when sales occur and when cash is received 
• Account for seasonality and any expected changes in business conditions 
• Create multiple scenarios (best case, worst case, and most likely) to account for uncertainties 
• Regularly update and refine the forecast as new information becomes available 

Collecting Financial Data 

The cash flow forecast typically includes line items for cash receipts (e.g., sales, collections, financing) and cash disbursements (e.g., supplier payments, payroll, capital expenditures, loan repayments). 

Key components needed for an accurate forecast include: 

• Sales projections 
• Accounts receivable and account payable schedules 
• Inventory levels and purchasing plans 
• Capital expenditure plans 
• Debt repayment schedules 
• Tax obligations  

Gathering comprehensive and accurate financial data is crucial for creating reliable cash flow forecasts. This process involves several key steps: 

• Extracting data from accounting systems and financial statements, 
• Collecting information on pending sales and purchase orders, 
• Reviewing contracts for recurring revenue or expenses, and 
• Analyzing historical cash flow patterns. 

By compiling this information, businesses can build a solid foundation for their cash flow projections. This foundation ensures their forecasts rely on the most up-to-date and relevant financial data.

When identifying and categorizing income and expenses, consider: 

• Breaking down revenue by product line, customer segment, or geographic region 
• Categorizing expenses into fixed and variable costs 
• Separating operational expenses from capital expenditures 
• Accounting for non-cash items like depreciation and amortization 

Various tools and software can assist in the data collection and reduce errors for cash flow forecasting. These include popular accounting software like QuickBooks and Xero, which provide detailed financial records and reports. Enterprise Resource Planning (ERP) systems offer comprehensive business management solutions that integrate various aspects of operations, including financials. Customer Relationship Management (CRM) tools can provide valuable insights into sales pipelines and customer payment behaviors. 

Additionally, specialized cash flow forecasting software streamlines the forecasting process and provides advanced analytical capabilities. By leveraging technology, businesses can automate data collection, reduce errors, and gain more timely insights into their cash flow patterns and projections. 

Analyzing and Projecting Cash Flow  

Once the financial data is collected, the next step is to analyze current cash flow patterns and project future trends. This involves: 

• Identifying trends and patterns in historical cash flow data 
• Adjusting for known future changes (e.g., new contracts, planned investments) 
• Applying growth rates based on market conditions and company strategy 
• Accounting for seasonal fluctuations 

When creating projections, it is important to use different scenarios and assumptions to account for uncertainties. This might include: 

• Best-case scenario: Assuming optimal market conditions and business performance 
• Worst-case scenario: Accounting for potential market downturns or operational challenges 
• Most likely scenario: Based on the most probable outcomes given current information 

Businesses should be prepared to adjust their forecasts based on changing conditions. The dynamic nature of business environments means that assumptions and projections need to be flexible and responsive to new information and events. 

For example, if a major customer delays payments, it is crucial to adjust the accounts receivable projections accordingly. This ensures that the forecast accurately reflects the expected timing of cash inflows. Similarly, if a new product launch exceeds expectations, increase sales projections to capture this positive development. Conversely, if market conditions deteriorate, it is important to revise growth assumptions downward to reflect the more challenging business environment. 

Regular review and adjustment of forecasts ensure they remain relevant and useful for decision-making. Updating projections based on the latest information and trends can maintain the accuracy and reliability of cash flow forecasts. This ongoing process of refinement allows companies to make informed decisions and respond quickly to changing financial circumstances. 

How to Improve a Cash Flow Spreadsheet 

Basic cash flow spreadsheets have notable limitations that can impact their effectiveness. Manual data entry errors can lead to inaccurate projections and poor decision-making, especially as data complexity increases. They also struggle with handling complex scenarios and multiple variables, potentially oversimplifying financial dynamics. 

Additionally, basic spreadsheets lack real-time updates, leading to outdated information and hindering timely decision-making. Furthermore, they often offer limited visualization capabilities which make it difficult to clearly present and interpret trends and projections. 

Several strategies can enhance the accuracy and usability of cash flow spreadsheets:.  

• Employ data validation techniques to prevent errors and ensure valid data in the data entry process. 
• Use conditional formatting to highlight important information to identify key trends or potential issues. 
• Utilizing pivot tables allows for analyzing data better, enabling users to quickly reorganize and summarize copious amounts of financial data. 
• Creating dashboard views can provide quick insights and decision-making into the most critical aspects of cash flow. 
• Incorporating scenario modeling functions enables easy comparison of different projections, helping businesses plan for various potential outcomes. Additionally, integrate sensitivity analysis to understand the impact of changing variables, providing a more comprehensive view of potential risks and opportunities.

Advanced features can further improve the forecasting process.:  

• Imports from accounting systems significantly reduce manual data entry and associated errors. They also ensure that the forecast always reflects the most up-to-date financial information.
• Dynamic charting and graphing capabilities can transform complex financial data into understandable visual representations, creating better communication of cash flow trends and projections. 
• Lastly, cash flow variance analysis tools can help identify discrepancies between projected and actual cash flows. It enables businesses to refine their forecasting methods and improve accuracy over time. 

How Automation Can Streamline Cash Flow Forecasting 

Automating cash flow forecasting processes provides several key advantages. Foremost, it reduces manual errors and enhances accuracy. By automating data collection and processing, businesses can also save significant amounts of time. Real-time updates and insights become readily available, allowing for quicker adjustments and decision-making. 

Additionally, automation facilitates the rapid running of multiple scenarios, which aids in better financial planning. Improved collaboration across departments is another benefit, as automated systems streamline communication and data sharing. 

Further, automation significantly enhances the forecasting process by integrating data from multiple sources seamlessly. It leverages machine learning algorithms to refine prediction accuracy, which helps in making more reliable forecasts. Automated solutions also provide alerts for potential cash flow issues, allowing businesses to address problems before they escalate. Automation can also generate reports for different stakeholders, ensuring all parties have the information they need. 

TreviPay’s automated solutions enable businesses to better control their cash flow and streamline their cash flow forecasting processes. 

TreviPay’s Solutions for Cash Flow Forecasting 

TreviPay provides innovative payments and accounts receivable solutions that significantly enhance cash flow forecasting and management. Our service handles underwriting, onboarding, and collections and extends payment terms on your behalf. With TreviPay, companies receive payments in as little as 48 hours leading to a lower DSO and improved cash flow.

To learn more about how TreviPay can transform your cash flow, please visit our Solutions page or Contact us . Request a demo today and discover how TreviPay can empower your business with innovative financial management tools.

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• Example of a cashflow
• Business Finance
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• Back to Business plans and cashflow
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• Example of a business plan

As well as your business plan, a set of financial statements detailing you cashflow is essential. This will provide details of actual cash required by your business on a day-to-day, month-to-month and year-to-year basis.

The needs of a business constantly change and your cashflow will highlight any shortfalls in cash that will need to be bridged. Many established, viable, and even profitable businesses fail due to cash not being available when they need it most.

Good cashflow management is critical to running a successful business. You must be able to pay your bills while you await payment from your customers. There are many well-documented cases of businesses failing not because they weren't profitable but due to poor cashflow management.

You're in business to make a profit. It's a simple principle, but one that can occasionally become lost amid dreams of building multinational empires worth millions of pounds. You won't be able to stay in business, however, unless you have cash, hence the famous adage 'cash is king'.

There will probably be a time lag between your business providing its goods or services and getting paid. This means you have to make sure there is sufficient cash in your company's bank account for it to pay all its bills in the meantime – whether these relate to invoices from suppliers, employees' wages, rent, rates, tax, VAT or anything else.

Even if your business is profitable, there may be times when you are short of cash because you are awaiting payment for a large order. This is likely to be a particular problem during your first year when you are building up your business and don't have regular cash inflows.

The general principle of cashflow management is that you should speed up your cash inflows (customer payments, interest from bank accounts etc) and slow down your cash outflows within reason (purchase of stock and equipment, loan repayments and tax charges etc) as much as possible.

It can be difficult to affect your outflows other than extending your credit terms with your suppliers, which will often occur on fixed dates in the month and your employees and suppliers might also not take too kindly to you delaying payment to them. But there is more scope for you to improve your cash inflows.

This could mean billing regularly, chasing bad debt, selling your debt to a third party (factoring), negotiating extended credit terms with suppliers, managing your stock effectively (which could entail ordering little and often) and giving your customers 30-day payment terms.

Also, as businesses naturally have peaks and troughs, it is important that you put money away during the peaks so that you can dip into it during the troughs.

It is a good idea to think about investing in some accounting software to help you manage your cashflow. There are many software providers: an internet search should reveal the most common. Most provide software that can help you with cashflow analysis and forecasting, so that your business is never caught short of cash in the bank. Your accountant should be able to help advise you on which software package to buy.

How to use the cashflow forecast template

Our cashflow template will show you how a cashflow works and should be amended to suit your own business.

All figures to be entered are actual cash. This includes bank payments and receipts, cheques, bank transfers, cash payments and receipts – all of these should be included in your opening balance.  

Then complete the shaded area opening balance, which includes bank, loan and cash balances and should be put in the sheets:

• monthly cashflow forecast
• monthly actual cashflow

This provides the starting point for the rest of the cashflow. Next, input your month 1 forecast – all the sales broken down into the elements of your particular business – and do the same for expenditure. Base your figures on your own experience and what you forecast to receive or pay. The sections can be amended to reflect your business's requirements.

Repeat this process for the actual cashflow; here the figures you input are based on actual. This should then automatically be displayed in the third sheet:

• monthly cashflow forecast/actual comparison

This is where the real analysis work is done and will determine the accuracy of your forecast figures. The forecasts sheet should be used to determine when you may have a cash shortfall before the event arises and will help determine whether you will need to obtain additional funding.

Download the cashflow template from 'Related documents'.

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ACCA Cashflow Template

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