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Cashflow Forecast_Monthly Template

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Understanding a Cash Flow Forecast

The Importance of Cash Flow Forecasts

All companies need to do monthly cash flow statements andcash flow forecasts, at the end or the beginning of the month. The cash flow statement, which should be run by a bookkeeper or accountant, is the financial statement that shows how much cash is coming in to, or leaving, the company. It shows what the cash, or equivalent thereof, is being used for, and it shows how well a company is doing, including daily, weekly, and monthly operations; or, to the contrary, the loss a company is making on a daily, weekly, or monthly basis.

The cash flow forecast allows a company to predict what the future is going to look like and allows them to plan carefully for the upcoming months. The forecasts are based on history, experience, knowledge, old strategies, new strategies, global trends, current trends, past, future, and current sales, and anything that a cash flow forecast template reminds you to look at.

A business of any size may make use of cash flow forecast templates to help the bookkeeping process. Cash flow forecasts are vital tools when it comes to planning and making both short and long-term decisions. A cash flow forecast can be done by a bookkeeper or accountant. Not all companies employ bookkeepers, some get their bookkeeping done online, while others make use of software platforms where they can do their own bookkeeping and cash flow forecasts.

What Should A Cash Flow Statement Include?

A cash flow statement should record the following information:

  • Cash from daily, weekly, and monthly business.
  • Cash that comes in and cash that goes out.
  • Cash for petty purchases, known as petty cash.
  • Cash from investments.
  • Cash from financing.

A cash flow forecast will highlight what your future expenditure is going to look like. It helps you make the right decisions, not based on what you hope is going to happen, or what you instinctively feel is going to happen, but on what, given your past performance and your current growth, or struggle, forecasts.

A cash flow forecast helps you to:

  • Make the right business decision based on logical information.
  • Help you investigate the future.
  • Assist you in making decisions now, based on what the future will look like.
  • Help you handle your cash flow in the short-term and long-term.
What Is A Cash Flow Forecast Based On?

What you base your cash flow forecast on entirely depends on the level of your business. A simple business will have a relatively simple cash flow forecast. In comparison, a larger and more established business is going to have a cash flow forecast that is a little more complicated. You get to choose how simple or complicated you want to make your cash flow forecasts. As your company grows, so your cash flow forecasts need to grow.

Simply put, when working on your cash flow forecast, you should keep the following in mind:

  • Start a cash flow forecast with the opening account balance. You may have more than one account. If you manage your business from several accounts, take the balance of all these accounts as the opening account balance.
  • Add any money that is expected to come in. You now have a higher total than your initial opening balance. The money coming in could be from projected customer sales, cash inflow from the bank, interest from the bank or investments.
  • Deduct the amount of money you know is going to leave the business. These are your regular payments, such as salaries, electricity, running expenses, capital expenditure and so on. This is the outflow.
  • The balance is either going to be positive or negative. If it is positive, you have a good cash flow forecast. If it is negative, you need to do something to try and change your cash flow forecast from negative to positive. In other words, you need to manage your business differently.

It is often as a company gets bigger and starts growing, that you need to manage your cash even more carefully than before. If you have a bookkeeper or accountant, their job is to manage all aspects of your finances. If you do your bookkeeping online, the same applies. They manage all aspects of your finances. If you are a business owner, you need to stay on top of your finances, or be involved with the finance and accounting department. If you choose to use a bookkeeping or accounting software platform online, follow the advised instructions or simply download any one of ourcash flow forecast templates, fill-in the blanks and save. That’s it.

Cash Flow Forecasts Are Based on Data, History and Future Outlook

If you have been in business for a few years, then your cash flow forecasts are going to be based on the following:

  • Historical knowledge
  • Experience
  • Past sales and expected future sales
  • Customer information and interest
  • Marketing plans
  • Past and new strategies
  • Current affairs and current market trends
  • Global trends
  • Data analysis and research
  • Old bank statements
  • Goals, past and present

It may be slightly difficult to do a cash flow forecast when you are a brand-new company. However, don’t let this scare you from. As a newfound business, you will have created a highly detailed business plan, worked out your strategies and goals, worked on your finances, and you will have a strong marketing plan which will help you work out your projected profit margins. Market trends are also going to come into it.

In other words, a cash flow forecast for a new company can include:

  • Your overall business plan
  • Projected profits (or losses)
  • Current knowledge
  • Marketing plans
  • Projections
  • New strategies
  • Data analysis and research
  • Current global trends and future global trends
  • Customer interest
  • Goals

Your business goals with remain relevant when managing the finances of your business. If you list your goals when doing your cash flow forecasts,you keep sight of where it is you want to be heading and in which direction. Goals always give you impetus to do better, so it is important to have them.

Cash Flow Forecasts Can Always Be Revisited

The beauty of cash flow forecast templates is that they can always be revisited. Your business is something that you are learning about as you go along. Global trends change on a regular basis. Something that was looking bad last month might start looking positive next month. Your marketing might take time to get off the ground. You might choose to target new markets. Unexpected new clients could find their way to you. Obviously, these are things you need to strive for, but whatever the case, you should be revisiting your cash flow forecast throughout it all.

To keep your eye on the ball, we recommend you use cash flow forecast templates that are already designed, to help you hold on to your goals and keep track of your cash flow.

A Common Misunderstanding

Remember that when you do a cash flow forecast, you are not looking at future invoices, you are looking at the actual cash you are expecting to come in. An invoice is not a cash injection. Only the cash is a cash injection. Cash flow means that actual cash is coming in and out. Cash flow forecasts need to be based on actual cash coming in and out.

What Else Can A Cash Flow Statement Help You Do?
  • It will help you curb company spending.
  • Identify problem areas
  • Expand your business, depending oncash flow projections.
  • Hire more staff, depending on cash flow projections.
  • Make projections based on seasonal projections.
  • Increase your marketing efforts and spending.
  • Redefine your business goals and strategy.
How Is A Cash Flow Statement Different from A Cash Flow Forecast?

Cash flow statements are different to balance sheets and income statements, and they are different to cash forecasts. A cash flow statement is current, and does not forecast future cash flow, whether incoming or outgoing. A balance sheet and an income statement both include sales made on credit. A cash flow statement is purely about the cash, whereas cash flow forecasts are about the future. A cash flow forecast highlights the potential of a business, and can see where the strengths are, and where any pitfalls may be.

A cash flow forecast allows you to make good decisions based on what the future is predicted to bring.

What Constitutes Cash

Customers do not need to pay you in cash, but they do need to pay you. Cash payments generally constitute:

  • Cash
  • Credit card or bank card
  • Direct deposits
  • Revenue from investments
  • Tax refunds

If you go through all the above, and you are a new business, you can do your own cash flow forecast by using a cash flow template. We do recommend you use a ready designed template that makes it nearly impossible for you to leave something out. Having a successful business means there should be no omissions. There should be no gasps about the things that were not forecasted, good or bad, when they should have been forecasted. A cash flow template will help you record all the information required to complete such a crucial document.

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