Cash Flow Forecasting & Projection

Cash moves into and out of the business at various times. A Cash Flow Forecast is a report that lays out when cash will come into and out of the business.

Effectively you are forecasting what will be your bank balance at any given time in the future. It helps you to see the ‘peaks and troughs’ in your cash position, so you can fix the troughs before they occur.

Cash Flow is the term used to describe the activity of cash moving in and out of the business. For example cash coming in from sales, loans, interest etc. and cash going out e.g. expenses, taxes, dividends etc.

Cash Flow Forecast is a report that shows the movement of cash into and out of the business, as well as the opening and closing bank balance each day, week, month etc. The Cash Flow Forecast is probably the most important financial management tool in any business. It sets out clearly where the Cash Flow issues will be in the future, which provides an opportunity to deal with it well in advance.

We often find money sitting in the wrong place i.e. not in business bank accounts. There are quite a few places it can be. We’re happy to discuss them with you and help you to move the funds more quickly into your business bank account, so that you can more easily pay all your expenses and grow your business more efficiently.

Sometimes in business, the movement of cash can get quite confusing. The bank balance may look fine, but you’re never really sure how much of it is yours. There are taxes to pay, outstanding supplier invoices and monthly charges. A cash flow forecast plots it all out in black and white to see exactly what your cash position will be at the end of each month, week or day.

Cash flow forecasting and projections allow businesses to better manage their finances by predicting future cash flow needs. This allows for better budgeting and planning, leading to increased profitability and decreased financial risk. Additionally, cash flow forecasting can help identify potential problems early on, so corrective actions can be taken before they become too difficult or costly to address.

It eliminates the guesswork so you can feel confident about your cash position. Once you’ve plotted it all out, it puts you in a position to keep your organisation running confidently. Having a professional CFO cultivate and manage these systems for you means that you will have a clear plan for the future success of your business. The biggest benefits are minimising risk and maximising potential growth.

Usually it’s done on a monthly basis i.e. you note the opening bank balance at the start of the month, plus cash coming in, less cash going out and the resulting bank balance at the end of the month. You can do it for as many months as you like and you will be able to see what should be your bank balance well into the future. Many people do the forecast on a spreadsheet or there are many apps you can use.

Once you’ve put it together, it doesn’t end there! You can work with the numbers to fix any issues, such as a negative balance, if you don’t have an overdraft in place. You can speed up payments from customers, slow down payments to suppliers, inject some of your own funds or borrow externally etc.

You need to know:

The correct opening bank balance. This isn’t just the balance that’s on your bank statement, but the reconciled balance, which takes into account any unpresented transactions, such as transfers in and out that haven’t hit your bank account yet.
Funds coming in
How much is owed to you by customers that you give terms to pay. You will need to factor in a timeframe for these to be paid.
Future expected
Sales and what is the expected time customers will take to pay.
Loan funds and interest
Tax refunds/grants/subsidies
Shareholder/Investor funds
Sale of assets
Funds going out
How much you owe suppliers that give you terms to pay. You will need to factor in a timeframe for paying these.
Future expected
Expenses e.g. rent, wages, advertising etc.
Cost e.g. goods to sell, labour and materials on jobs
Taxes due
Loan repayments and interest payments
Dividends
Capital expenditure e.g. equipment

Partnering with CFO On-call makes financial sense. We have a proven track record of creating a 5 to 10 times return on investment. By leveraging the expertise of our virtual CFOs, your business can benefit significantly in several essential ways, including:

• Profit increase — Your return on investment will manifest itself in an increased profit margin. Many of our regular clients have seen up to 51% profit increase.
• Cash flow management — No matter what stage of your business you’re in, we can help manage expectations and make steady plans for growth.
• Business exit strategy — If you’re looking to retire and sell your business, you need a solid plan. Our virtual CFOs have years of experience in modelling the end of a business owner’s tenure and creating maximum business value. 
• Financial modelling & reporting — You will receive detailed regular financial reports, so you’re constantly aware of all essential information, enabling you to make well informed decisions
• Bank loan attainment — If you need a bank loan, you need someone who has experience attaining one. Also ensuring you get the right type of finance for your business and the most cost effective finance.
• Systems & process management — The best CFOs make sure that there’s no need to worry about the inner financial workings of your business. We can set systems in place to run a smooth operation, so that the owner can take some well earned time off!