Cash Flow Forecasts and Planning

A budgeted cash flow forecast includes cash from external financing. Just one month in deficit can signal a cash flow crisis.

Planning Monthly Cash Flow

When planning any business using Figurewizard, the two most important questions to be answered by its forecasts are: How much cash and when? This is the job of the budgeted cash flow forecast, making it the most important component of any business plan.

Cash Flow and Stock Control

Cash flow forecasts showing deficits for one or more months, will need additional cash to remove them but before taking on more finance (only a short-term remedy not a solution) your planning should first concentrate on raising cash from operations, starting with stock control.

In this example, using the What-If Calculator to reduce year-end stock by stages of 20%; forecast cash flow, monthly high and low points for the bank plus undrawn and available financing and the bank at the year-end change as follows:

Stock less: Stock Value Months Overdrawn Max. Month Free Cash and Finance Min. Month Free Cash and Finance Cash and Finance Deficit Months Bank Year-End
0% 125,000 10 54,920 -16,263 2 -35,439
20% 100,000 7 75,235 -11,442 2 -10,250
40% 75,000 6 104,709 -6,621 2 14,238

Budgeted monthly free cash in this example represents net budgeted cash flow plus an agreed overdraft limit set at 50,000.

Reducing Purchases and Fixed Overheads

In this next example stock / inventory is again reduced in stages of 20% while fixed assets, which amount to 430,000 in the sample forecast are reduced by stages of 5%.

Fixed Overheads Stock Value Months Overdrawn Max. Month Free Cash and Finance Min. Month Free Cash and Finance Cash and Finance Deficit Months Bank Year-End
430,000 125,000 10 54,920 -16,263 2 -35,439
408,500 100,000 6 91,442 -4,539 1 11,417
387,000 75,000 5 127,866 7,185 0 57,546

Fixed oveheads and stock / inventory levels should only be a start. Variable overheads, expenditure on fixed assets (with or without asset finance) and the quality of your credit control can also play a major role in improving liquidity and cash flow.

Howevr your own figures work out, having accurate and reliable forecasts for cash flows as well as for profits will be important to a bank if additional finance is being sought, showing not just how much but for how long.

Budgeting for Dividends and Cash Flow

A budget is a plan and any plan will call for accurate forecasts. Uniquely this is what Figurewizard does, including when planning includes dividends to be issued.

This is the job of the Dividend Calculator and Planner. You simply enter the value of dividend to be issued and when and the system immediately reports updated forecasts for the bank, cash flows, liquidity and equity in real time. Everything else including VAT and corporation tax will have been re-calculated and taken into account.

Corporation Tax and Marginal Relief From 2023 Deferred Income Explained What is a Monthly Cash Flow Forecast What is Pretax Profit How does a balance sheet balance? Lockdown Recovery: Forecasting Profits, Cash and Finance. How to Apply for Business Interruption Scheme with Figurewizard How to calculate liquidity and short-term liquidity How to calculate markup and margin The Truth about Monarch Airlines Labour's Spending over 10 years from 2000 How to make profits and not run out of cash Credit Checking - How to Read Micro or Short Form Accounts Amortisation of Arrangement Fees for Long Term Loans BHS Profits Performance 2010 - 2014 BHS profits, liquidity and cash flows 2009 - 2014 How to Calculate a Free Cash Flow Forecast Campari: How to apply for a bank business loan What are Current Liabilities What are Current Assets Late Payers and Cash Flow What is Operating Cash Flow? What is Working Capital How to Read a Balance Sheet Business Planning Cash Flow Calculator Short Term Liquidity Business Liquidity Corporation Tax is not Calculated on Net Profit Small Business Corporation Tax Cash Flow Calculator Using Figurewizard - VAT Using Figurewizard - Sales by Month Using Figurewizard - HP or Instalment Plan Budgets Using Figurewizard - How the budgeted cash flow forecast is calculated Using Figurewizard - Fixed Asset Budgets Using Figurewizard - Calculate Purchase of Goods Using Figurewizard - Forecasting Payments to Suppliers Using Figurewizard - How to Forecast Cash Collection Solvency and the Balance Sheet Property in the Balance Sheet Why Equity is a Liability Asset Management and Liquidity Selling Fixed Assets Contracts: Invitation to Treat What is Deferred Income Loss on the Sale of Fixed Assets Calculating Gross Profit Margin Profit and Loss Statement What is Operating Profit What is Net Operating Revenue What is Equity Profit on the Sale of Fixed Assets How Taxable Profit is Calculated What are Operating Overheads Overheads - Provisions How Depreciation is Calculated What is Business Operating Activity What are Fixed Assets Liquidity and Cash Flow Balance Sheet Liabilities and Leases Stock or Inventory Control What is Distressed Stock or Inventory What is Interest Suspense Account Product Safety Laws What is a Bill of Exchange What is Payment at Sight What is a Pro Forma Invoice What is a Bill of Lading What is a packing note What is Demurrage Cash Flow Forecasts and Planning Factoring: Invoice Discounting and Cash Flow How Does VAT Work Figurewizard as a Sales Aid for Factoring and Invoice Discounting