Starting a cash flow forecast

Profit and loss account

• Your income may increase or decrease during holiday periods, or with the change in seasons
• Think about the timing of expenses
  
• Memberships may be once a year
  
• Superannuation Guarantee payments are made quarterly
  
• Your power bill is likely to be higher in winter
  
• Rates are paid four times a year
  
• Large planned maintenance costs should be included
  
• When will you sell purchased goods – the next month, the next season…?
  
• Do you pay less wages during the Christmas period?
• You may be considering extending your product range – how much additional revenue do you expect? How would your costs change?
• Maybe you’d like an additional employee – will this employee generate more business income, or perhaps take over some of your tasks to free you up? Remember – business improvement isn’t just about making money. Having downtime to enjoy your success is just as important

Balance sheet

• Will you purchase assets, and when?
• Do you plan to sell an asset?
• Will you obtain a loan?
• Factor in any fixed loan or finance payments
• If you withdraw regular amounts from the business as living expense, include these as well

Tax stuff

• Add your expected GST payments to each relevant month – include a formula which roughly calculates this from the information you’ve already entered
• If you know the amount of your provisional or terminal tax payments, add them in
  
• You can even estimate this, based on the figures in your Profit and Loss Account above

Cash summary

• The (expected) bank balance at the beginning of the forecast period – Aug 2020 in the snip below
  
• For the first month, you’ll need to type in the opening balance
  ($2,652.32)
  
• For each of the following months, your opening balance will be the same as the closing balance from the previous month, so add a formula in your spreadsheet to cover that
  Note how the opening balance for Sep 2020 is the same as the closing balance of Aug 2020 ($1,248.57)
  
• The net cash movement for the month – this will be your income plus any money received from loans or sale of assets, minus expenses, minus payments for assets, taxes and loans
  
• $1,403.75
  
• The next row should have a formula, adding 1 and 2 together – this gives you your closing bank balance at the end of the month
  
• ($1,248.57)

What does your closing cash balance show you?

• The monthly closing cash balances may indicate you need additional money- will you go into overdraft (with high interest rates) or find another funding source?
• Is there a build up of cash? What could you do with it – upgrade assets, wage increases, pay off debt, put aside for tax or savings?
• What would happen if you brought forward, or pushed back, the date you purchase an asset?

Who are Beany?