Cash flow forecasts

Cash flow forecasts predictCash flow inCash flow outCash left

for a given period (usually a year)

Forewarns any cash flow shortfalls or peaksHelps business owners prepare for themExposes debt collection issues

Benefits of cash flow forecasting:

Cash is... any liquid asset

that can be turned into cash to pay an urgent debt

Cash flow forecasting in 4 steps:

Identify cash inIdentify cash outCalculate net cash flowAdjust bank balancesCash flow forecasting in 4 steps:

Step 1: Identify cash inCash in can beCash salesInterest on savingsDebts repaid Cash from a loan

plus other types of easily accessible income

Step 2: Identify cash outCash out can bePurchasesUtility billsWages

however, depreciation does not count even though interest counts as a cash in source

Step 3: Calculate net cash flowSubtract cash out from cash in to find net cash flow

The equation is simple - the hard part is accurately identifying the sources defining the flow of cash

Step 4: Adjust bank balancesAdd net cash flow to bank balance for the beginning of the month to predict whats going to happen by the end of the month

Just be carefulAt the end of every month you can compare forecast to reality Just make sure you leave the correct closing bank figure in your recordsIf you dont future forecasts will be inaccurate

Business.govt.nz provides free access to a wide range of resources, including tools and interactive content. It acts as a gateway to government and private sector business information, news and services.Next steps:Cash flow forecastingIntroduction to raising capitalCan you afford to start a businessFinding sources of capitalSWOT analysisAssess if you are ready to start upFind out more with Business.govt.nz:

Direct manufacturing costs include both material and labour costs.Direct manufacturing costs include both material and labour costs.For more detailed information on cash flow forecasting check out this article: http://www.business.govt.nz/starting-up/cash-flow-forecasting