Business Tools: Cash Flow Forecasts

In our opinion Cash Flow Budgets and Forecasts are amongst the most under-utilized tools in a small businesses arsenal.

Generally new businesses will generate a Cash Flow Forecast for the first year of operation as it was part of a bank submission for funding but after the first year interest often fades. Monthly cash flow forecasts are fundamental in the efficient running of your small business and should be created annually and monitored at least monthly.

Benefits of preparing a cash flow forecast include:

  1. It creates a set of targets that can be used to motivate the team.It enables forward planning and setting of future goals.
  2. It provides a means of measuring business performance.
  3. It provides a tool for managers to use as part of their decision making process.
  4. It can indicate whether or not additional funding is required through the analysis of the businesses ability to generate cash.

Creating a cash flow forecast is a very straight forward process. Start with an opening balance, add the income cash and subtract the outgoing cash. The balance becomes the opening balance for the next period. Free templates can be sourced from the net or talk to your accountant!


Richard Kemp – Watts Price Accountants

The advice provided on this Article is general advice only. It has been prepared without taking into account your objectives, financial situation or needs.