Cash flow forecast template

Cash is the lifeblood of your business, with 31% of business owners worried about their cash flow in 2024. If your company doesn't generate enough cash from its activities, it won't cover its expenses and have enough left to repay investors or grow the business.A cash flow projection helps you track and optimise working capital, tracking the money going in and out of your business on a regular basis to respond to market changes and adapt your resources.

Why is a Cash Flow Projection Important?

A cash flow projection is a core pillar of running your business, enabling you to keep your finances stable, avoid cash shortages, and make informed decisions about where to allocate your resources. 

Effective cash flow projections provide a clear view of your financial landscape, helping you track spend against goals, adjust forecasts in line with conditions on the ground and adapt to changing circumstances.

Benefits of Cash Flow Projections

• Maintaining Financial Stability: By forecasting cash flow, businesses can ensure they have enough funds to cover their operational expenses each month, preventing disruptions in their activities.
• Preventing Cash Shortages: Accurate cash flow projections help identify periods when cash might be tight, allowing businesses to plan ahead and secure necessary financing.
• Informed Financial Decisions: With a clear understanding of their cash position, businesses can make better decisions regarding investments, expenditures, and growth opportunities.

What impacts business cash flow?

Overhead Expenses and Indirect Costs

If your business running costs exceed incoming revenue, you will fall into negative working capital and risk running out of cash. This is where managing your costs is key.

• Regularly Review Expenses: Conduct a monthly review of all overhead costs to identify areas for reduction.
• Negotiate with Suppliers: Seek better terms or bulk discounts to lower costs.
• Improve Energy-Efficient Practices: Reduce utility bills by implementing energy-saving measures.

Receivables Management

The speed at which your customers pay for goods or services affects the amount of money coming in and the business's cash flow. The longer they take to pay, the longer you’re out of pocket.

• Implement Clear Payment Terms: Ensure all invoices have clear payment terms and follow up promptly on overdue accounts.
• Offer Incentives for Early Payment: Provide discounts to customers who pay early.

Investing and Financing Decisions

Purchasing expensive equipment or new office space can dramatically decrease your cash flow. How your business chooses to fund these purchases also affects cash flow.

• Assess ROI Carefully: Evaluate the return on investment before making significant purchases.
• Consider Leasing: Leasing equipment can spread the cost over time and preserve cash flow.
• Explore Financing Options: Use financing solutions that align with your cash flow needs, such as iwoca's flexible loan option

What is a cash flow statement

To get an accurate picture of your cash flow, you’ll need to produce a cash flow statement, which works alongside your balance sheet and income statement. 

A cash flow statement is a financial statement that summarises the amount of cash entering and leaving your business. It can highlight how well your cash position is being managed and measures how you generate cash to pay off any debt and fund your operating expenses.

Creating a cash flow statement will help you keep on top of things and picture how your business is performing, in the following format:

1. Cash from Operating Activities: This section shows the cash generated from your core business operations. It includes:some text
   1. Receipts from sales of goods and services
   2. Payments to suppliers and employees
   3. Interest received
   4. Income tax paid
2. Cash from Investing Activities: Cash used for investing in the business's future. It includes:some text
   1. Purchase of equipment or property
   2. Proceeds from the sale of assets
   3. Investments in securities
3. Cash from Financing Activities: This section outlines the cash flow between the business and its owners, creditors, and investors. It includes:some text
   1. Proceeds from issuing shares or debt
   2. Repayment of borrowings
   3. Dividends paid
4. Disclosure of Noncash Activities: This section details significant financial activities that do not involve cash transactions but affect the business's financial position. It includes:some text
   1. Conversion of debt to equity
   2. Acquisition of assets by assuming liabilities
   3. Stock dividends

Cash flow projection template

In simple terms, a cash flow projection is a document where you can record your business’s outgoings (costs) and balance them with the money you have coming in (income). This forecast helps you anticipate periods of cash surplus or shortage and plan accordingly.

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What to Include in Your Cash Flow Forecast

In the template, you’ll need to detail all outgoings, such as:

• Staff Salaries: Regular wages paid to employees.
• Rent Payments: Monthly or quarterly payments for your business premises.
• Cost of Materials: Expenses for raw materials or goods for resale.
• Utilities: Payments for electricity, water, gas, and other utilities.
• Miscellaneous Expenses: Any other recurring costs such as insurance, office supplies, and maintenance.

And all incoming payments, such as:

• Sales Revenues: Income from selling products or services.
• Cash Grants: Financial aid received from government or private entities.
• Small Business Loans: Funds borrowed to support business activities.
• Other Incomes: Any additional sources of income like interest earned or rental income.

How to do a Cash Flow Projection

Projecting cash flow is crucial for planning, making informed decisions, and avoiding financial pitfalls. Here’s a step-by-step guide to help you accurately project your business’s cash flow.

Step 1: Create a Detailed Budget

Creating a comprehensive budget is the foundation of effective cash flow projection. A detailed budget allows you to list all income sources and expenses, providing a clear picture of your financial situation.

Tips:

• List All Income Sources: Include sales revenues, investment incomes, grants, and loans.
• Detail All Expenses: Cover operational costs, salaries, rent, utilities, and any miscellaneous expenses.
• Categorise Expenses: Separate fixed costs (e.g., rent) from variable costs (e.g., materials).

Step 2: Use a Cash Flow Template

Utilising cash flow templates simplifies the forecasting process and ensures consistency and accuracy.

• Ease of Use: Templates are user-friendly and can be easily customised to suit your specific needs.
• Consistency: Using a template ensures that all necessary components are included and organised systematically.

Step 3: Estimate Cash Flow

Estimating cash flow involves using historical data and project plans to forecast future cash inflows and outflows.

• Historical Data: Analyse past financial data to identify patterns and trends.
• Project Plans: Consider future projects, investments, and expected income.
• Asset Impacts: Evaluate how the acquisition or sale of assets will impact cash flow.

Example: If you are investing in new equipment, factor in the initial outflow and the expected increase in productivity and revenue.

Step 4: Monitor and Adjust

Regularly monitoring and adjusting your cash flow forecast ensures it remains accurate and relevant.

• Frequent Reviews: Conduct monthly or quarterly reviews of your cash flow projections.
• Adjust for Changes: Modify forecasts based on actual performance, market changes, or unexpected expenses.
• Incremental Changes: Understand how small changes can significantly impact cash flow. For instance, a slight increase in sales can improve cash flow, while a minor rise in costs can decrease it.

Example: If you notice a seasonal dip in sales, adjust your projections to account for lower income during those periods and plan accordingly.

How short term finance can support your cash flow

Having a good amount of working capital is crucial for a small business. If you have limited working capital, iwoca offers cash flow support through small business loans. Whether you’re a small startup or just need a cash boost, cash flow loans for small businesses can help power growth — from bridging gaps in business cash flow to covering the cost of large stock orders or investments..

To find out more how much you could borrow and get a decision in less than 24 hours, apply now.

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