Navigation path
Prepare an annual cash flow forecast
Cash flow forecasting enables you to estimate whether you have sufficient cash to fund your debts or expansion plans over any given period of time.
This worksheet provides two charts to help you calculate your cash flow:
Once you have completed this annual cash flow forecast, we recommend you assess your Annual profit budget forecast as well. It is very important for a business not to confuse profits with cash flow.
Many people in small business prepare and use their budgets themselves while others use advisers. It's a matter of what the business owner can do and chooses to do.
Provisions for GST
When using the Annual cash flow forecast table, you need to include GST when inserting amounts for some cash inflows (particularly sales) and many cash outflows (particularly purchases). The difference between total GST inflows and total GST outflows should be calculated and inserted in the row titled 'GST payments' (under the Other items section in Cash outflows).
Different businesses are subject to differing GST requirements, so specific advice from your tax adviser is recommended.
How to use the annual cash flow forecast
In preparing your Annual cash flow forecast, you will need to use both the Annual cash flow forecast table and the Debtors and creditors analysis table, as information from the Debtors and creditors analysis table needs to be transferred to your Annual cash flow forecast.
Step 1 - Cash inflow
- Calculate the monthly cash inflow from Sales on the Debtors analysis spreadsheet.
- Transfer these amounts to the Annual cash flow forecast at line (A) 'Sales'.
- Sales of assets-use only if you plan to sell assets during the year.
- Capital injection-if you plan to inject owners funds or borrowed funds into the business.
- Other sources-this should include cash received other than from sales, such as interest.
- Total the cash inflows and enter at (B) 'Total cash inflow'.
Step 2 - Cash outflow
- Purchases-calculate the monthly cash outflow for Purchases on the Creditors analysis spreadsheet.
- Transfer this figure to the Annual cash flow forecast at line (C) 'Purchases'.
- Overheads-these are taken from your profit budget with the exception of non-cash items such as depreciation or provisions.
- Divide your annual expenses into monthly payments, putting the payments into the month it will be spent, eg. rent is usually a monthly expense.
- Telephone and electricity are usually quarterly.
- If you run a trading account with a supplier, you won't pay until next month (30 days), so place this into next month's column.
- Advertising is seasonal or specific to a special event, e.g. an opening, Easter or Christmas.
- Estimate bank charges, interest and all other money going out and place in their appropriate box.
- Other items-the other payments are for items not shown on a profit budget such as purchase of assets, loan repayments, tax repayments and owners drawings.
- Total the cash outflow and place at (F) 'Total cash outflow'. To do this, add the total figures that you have written in (C) 'Purchases', (D) 'Total overheads' and (E) 'Total other items'.
Step 3 - Net cash flow
Calculate your net cash flow (B) - (F), and place at (G) 'Net cash flow'. This is the real test. Does money in exceed money out?
Step 4 - Opening balance
Put your cash balance at the beginning of the month at (H) 'Opening balance'.
Step 5 - Cash at bank
Calculate your funds available at (J) 'Funds available' by adding (G) 'Net cash flow' and (H) 'Opening balance'. Note: If (G) 'Net cash flow' is negative, then the balance of your funds available will be reduced.
